ALBAWABA – Investor service firm Moody’s downgraded Egypt’s credit rating and sent the country’s dollar bonds plummeting on Friday, but later bounced back, amid calls by the International Monetary Fund (IMF) for another devaluation of the country’s national currency.
According to Bloomberg, the bonds were among the biggest losers across emerging markets on Friday, falling even deeper into distressed territory, before trimming losses.
Egypt’s bond due 2031 slid as much as $0.026 to a record low of $0.503 on the dollar, before paring losses to trade at 52.1, Bloomberg reported.
Likewise, the 2033 security slid to an all-time low of $0.505, yielding around 18 percent, before recovering to $0.526. Meanwhile, the 2061 note was little changed at $0.48 after falling as much as $0.023 cents at the open.
Moody’s lowered its assessment of Egypt’s sovereign debt by one notch to Caa1 after a week of turmoil in the country whose $470 billion economy is vital to the region’s energy and trade routes.
Authorities wanted to avoid a downgrade, as it affects the country’s attractiveness for investment. Some investors, including pension funds and corporate treasuries, shun CCC-rated debt, Bloomberg reported.
Moody's decision to downgrade Egypt's credit rating could not have come at a worse time as the IMF calls for further devaluation of the country's national currency - Shutterstock
Egypt’s credit rating has now fallen to one of the lowest rungs of speculative grading, as the cash-strapped economy scrambles to secure a stream of hard currencies and foreign investment.
With inflation at a record high and the economy mired in its worst crisis in years, President Abdel-Fattah el-Sisi said late Monday that he’ll seek a another term in the upcoming December elections. He’s widely expected to win, Bloomberg reported.
The government is racing to unlock more financing from a $3 billion IMF rescue package and from sales of state assets to energy-rich Gulf nations, including the United Arab Emirates.
Egypt is working on implementing more structural reforms in the face of its challenges, Finance Minister Mohamed Maait was cited as saying by state-run MENA news agency.
Notably, Egypt is Heavily exposed to the economic fallout from Russia’s invasion of Ukraine.
The country now needs to build up sufficient hard-currency buffers to manage another likely round of depreciation, after months of stability, amid a raging inflation crisis.
