Egypt, which is still struggling with the aftermath of popular unrest that last year toppled President Hosni Mubarak, had its long-term foreign currency issuer default ratings downgraded by Fitch Ratings on the eve of a run-off vote to choose a new head of state.
“The downgrade and negative outlook reflect increased uncertainties surrounding the political transition following yesterday’s ruling by the Supreme Constitutional Court to annul parliamentary elections and dissolve parliament,” Richard Fox, head of Fitch’s Middle East and Africa sovereign ratings, said in an e-mailed statement today. The long-term foreign currency rating was cut to B+ from BB-. The outlook for this and the long-term local currency rating were negative, the company said.
Egypt’s constitutional court yesterday dissolved parliament and rejected a law that curtailed the political rights of top officials in the former government, enabling Ahmed Shafik, Mubarak’s last prime minister, to continue his candidacy in tomorrow’s presidential race against the Muslim Brotherhood’s candidate Mohamed Mursi.
The rulings come at a time when Egypt lacks a constitution, with secular and Islamist politicians disputing the makeup of the panel that will write it, while the parliament and military- appointed government have repeatedly clashed. Those conflicts have stymied hopes of concluding a much-needed $3.2 billion International Monetary Fund loan, as the central bank has spent more than half its currency reserves since the start of last year as it seeks to bolster the pound.
“Whatever the ultimate outcome of these events, the political and policy making process has been complicated, delaying the likely implementation of the comprehensive macroeconomic and structural reforms needed to kick start recovery and ease financing strains,” Fox said.
Yields on benchmark 10-year dollar bonds climbed to 6.91 percent today, extending their two-day increase to 23 basis points. Five-year credit default swaps rose 22 basis points to 648, according to CMA, which is owned by GME Group Inc. and compiles data from the privately negotiated market.
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