LONDON/CAIRO (Reuters) – Egypt’s sovereign dollar bonds tumbled on Friday after ratings agency Moody’s downgraded its credit rating deeper into junk territory, ramping up the pressure on the cash-strapped nation as it heads into elections in December.”
Moody’s moved Egypt down one notch to ‘Caa1’ from ‘B3’, seven levels into junk, citing the country’s worsening debt affordability.
The north African nation is in the midst of a bruising economic crisis, with record inflation, crushing government debt and a plunging currency that has driven more of its citizens to seek risky routes out of the country.
All of Egypt’s sovereign dollar bonds slid lower, but the 2027 maturity fell the most, dropping nearly 3 cents, Tradeweb data showed, before retracing to a 1.5 cent loss at 0823 GMT. Most bonds are trading at their lowest since May.
Egypt has downgraded its pound currency to half its former value in the year to March. But on Thursday, International Monetary Fund (IMF) director Kristalina Georgieva told Bloomberg that Egypt will continue to “bleed” reserves unless it devalues again.
Georgieva also told Bloomberg there had been “constructive engagements” with Egypt, adding that she expected “more systematic work” between the IMF team and the government in the coming weeks.
Economists said the downgrade and Georgieva’s comments would make it tougher to attract cash into the country in the short term.
“The delays to the IMF reviews and the rating downgrade raise further concerns over Egypt’s large external financing gap,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, told Reuters.
“Significant and broad-based reforms will be needed to raise investor confidence and capital inflows.”
(Reporting by Libby George in London and Patrick Werr in Cairo; Editing by Karin Strohecker and Edwina Gibbs)
