Saturday, Jun 16, 2012
By Victoria Stilwell
Fitch Ratings downgraded its ratings on Egypt one notch further into junk territory, pointing to the increased uncertainties stemming from the Supreme Constitutional Court's ruling to annul parliamentary elections and dissolve parliament.
Fitch lowered Egypt's long-term foreign and local currency issuer default ratings to B-plus, which denotes speculative credit, from double-B-minus, which is in slightly speculative territory. The rating has a negative outlook.
The ratings firm said the county's policy-making process has been complicated by the political turmoil, which could delay the implementation of structural reforms the country needs to begin financial recovery. The firm said the need to re-run parliamentary elections will delay a workable government structure, and the re-writing of the country's constitution will also be delayed as the powers of the president and the future of parliament are both unclear.
Egypt's president is expected to emerge from this weekend's elections.
Fitch said the political uncertainty creates an environment that could hurt Egypt's financial recovery. Before these events, the firm noted that the economy had shown some signs of improvement, including a slight rise in international reserves in April and May after several months of decline.
The firm said outbreaks of political violence or other setbacks are likely to lead to a downgrade, as well as evidence that the political uncertainty was having greater costs on the economy.
Write to Victoria Stilwell at Victoria.Stilwell@dowjones.com
(END) Dow Jones Newswires
16-06-12 0734GMT
