Egypt at Risk of More Moody’s Cuts as IMF Support Delayed
A leading Salafi party said it would meet with opponents of President Mohamed Mursi today to help bridge political differences, in a push to end weeks of unrest that helped prompt another cut in Egypt’s junk credit rating.
The Nour Party, which held the second largest total of seats in the now-dissolved parliament, plans to meet secular opposition groups to discuss its proposal for a national coalition government, the state-run Al-Ahram newspaper said. Mursi’s secular and activist critics have shunned his offer of talks. The biggest secular bloc, the National Salvation Front, has made demands ranging from a new Cabinet to the president’s ouster.
The Salafi initiative is the latest effort to ease political tensions that persist two years after the overthrow of Hosni Mubarak, frequently erupting into violence. It comes a day after Moody’s Investors Service cut Egypt’s rating for a fifth time in two years, citing political violence that is setting back the prospect of economic recovery, and delays to a $4.8 billion International Monetary Fund loan.
The reduction took Egypt’s rating to B3, six levels below investment grade and on par with Ukraine and Argentina.
Even if the IMF loan comes through quickly, the “current deep political schisms and worsening social unrest make it even harder for the government to pursue a meaningful reform agenda,” including lowering subsidies and cutting the public sector workforce, Raza Agha, chief Middle East and Africa economist for VTB Capital Plc, wrote in an e-mailed note.
Yields on Egypt’s benchmark dollar-denominated bonds surged yesterday to the highest since June. They retreated 1 basis point to 6.80 percent at 11 a.m. in Cairo today. The pound has dropped 7.9 percent since the central bank started auctioning dollars to local lenders in December, limiting access to the U.S. currency.