On Wednesday, Moody’s Investors Service downgraded the deposit ratings of five Egyptian banks just one week after cutting the nation’s government bond ratings, and all deposit ratings have been listed with a negative outlook.
The Bank of Alexandria was downgraded from B3 to B2, Banque du Caire was downgraded from B3 to Caa1, Banque Misr was downgraded from B3 to Caa1, Commercial International Bank was downgraded from B3 to Caa1 and the National Bank of Egypt was downgraded from B3 to Caa1, Al Arabiya reports.
Last week, Moody’s downgraded Egypt’s sovereign rating to Caa1, citing “poor quality” and “very high credit risk,” estimating that the chance of default on foreign debts within five years is 40 percent.
Egypt is awaiting approval of a $4.8 billion loan from the International Monetary Fund, the delay of which some observers have attributed to the nation’s ongoing political instability. The nation’s $13 billion in foreign reserves would barely cover the cost of three months of imports, according to Al Arabiya.
Additionally, Moody’s said even if Egypt can secure the support of the IMF, “the risks facing a successful completion of a stand-by arrangement have risen in light of the economic and political challenges that have intensified as Egypt’s revolution has unfolded,” adding “there is more uncertainty over Egypt’s ability to regain macroeconomic stability and shore up its external and fiscal positions.”
Moody’s said that the country could upgrade its credit rating through “cohesiveness between the institutions of government…that improves government policy effectiveness and the functioning of Egypt’s post-revolution democracy,” “successful implementation of an IMF-supported economic and fiscal reform program…” and “enhanced political stability and an abatement of violent civil unrest.”