Plummeting Egypt set to become riskier than Greece


Jeremy Weltman
Published on:

Egypt's creditworthiness is falling - undermining its access to capital - amid a fraught political transition, according to Euromoney Country Risk's proprietary indicators.

Egypt’s ECR score, having stabilized during the past couple of months, has resumed its downward trend in June, falling in reaction to the country’s deteriorating access to capital, credit ratings and debt indicators.

Egypt’s fall from grace has seen it shed eight points since November, drop 11 places in the rankings since Q1 2012 and slip into the lowest of ECR’s five-tiered groups. The country is on the brink of becoming riskier than Greece. The downward trend in the ECR score has preceded the recent downgrading of Egypt to junk status by Fitch Ratings.

This follows the latest developments in the country’s political crisis:
First, a decision by the Supreme Constitutional Court to annul the parliament instituted earlier this year;
Second, an uncertain presidential election outcome after complaints of voting irregularities by both candidates – Ahmed Shafiq and Mohamed Morsi of the Muslim Brotherhood – in the June 15-16 run-off, which seem likely to delay matters;
Third, the increasing dominance of the country’s military, which is tightening its grip over the power of the presidency via constitutional amendments.

The Bank Audi team, led by Marwan Barakat, head of research and one of ECR’s contributors, states: “Before these latest events, the economic situation had shown some signs of easing, with, in particular, international reserves rising slightly in April and May after several months of sharp decline.

“However, the need to re-run parliamentary elections would delay the emergence of a governance structure. Such political uncertainty could weaken confidence and heighten near-term economic and financial pressures facing Egypt.”

This article was originally published in Euromoney Country Risk