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Moody’s Down Rates 5 Egyptian Banks

From a chuckling Associated Press:

Moody’s downgrades 5 Egyptian banks

February 2, 2011

CAIRO (AP) — Moody’s Investors Service says it has downgraded its ratings for five Egyptian banks, and warns that further cuts could come…

The five banks affected were the National Bank of Egypt, Banque Misr, Banque du Caire, Commercial International Bank and Bank of Alexandria. Some of the banks saw their local currency deposit ratings cut by two notches

Talk about piling on. But that’s reality for you.

Standard & Poor’s joined Moody’s in cutting Egypt’s ratings — the second such downgrade in as many days. The third major ratings agency, Fitch, lowered its outlook for the country to negative last week…

S&P lowered Egypt’s long-term foreign currency sovereign rating to BB from BB+, and warned that another downgrade was possible within the next three months. The move put the rating solidly in junk status

Egypt, which had prided itself on decades of stability and, more recently, impressive GDP growth, was increasingly taking on the appearance of an investment pariah — if only for the short term.

The Egyptian pound, viewed as relatively stable because of solid Central Bank support, was trading at 5.8550 pounds to the dollar. It hit 5.8570 earlier in the day, approaching the January 2005 low of six pounds to the dollar. It appeared increasingly likely that the depreciation against the dollar would stoke inflationary fears in a nation where prices, critics complain, go up on a whim and rarely come down

Reflecting the prevailing worries in the country, a new round of companies announced they were suspending operations in Egypt.

Dubai-based DP World was among the most prominent, with the port operator saying the step was taken as "a precautionary measure." The move affected its operation at the Red Sea port of Sokhna, near the Suez Canal’s southern entrance

S&P also lowered its long and short-term local currency ratings to BB+/B from BBB/A-3, while the short-term foreign currency rating of B was unchanged.

The downgrades mean that the cost of borrowing would rise, burdening any Egyptian government in the short-term, be it one led by Mubarak or someone else.

The expectation among many analysts was that the government would have to ramp up spending in order to address the financial concerns that have been a significant catalyst in the protests.

Subsidies, which drain upward of 100 billion pounds ($17 billion) of the government’s budget, will likely have to be boosted to offset the expected commodity price increases and that undercut efforts to lower the public sector deficit.

"Fiscal deficits will be going up this year," said Hirsch. "Any money they need to borrow is going to be more expensive."

A lot of this last part sounds all too familiar.

But it can’t happen here. Right?

This article was posted by Steve on Wednesday, February 2nd, 2011. Comments are currently closed.

One Response to “Moody’s Down Rates 5 Egyptian Banks”

  1. Liberals Demise says:

    Talk about “When opportunity strikes….”
    It has come to my mind that as we watch the Middle East melt
    into chaos (with the help of our ever meddling, bumbling and inept
    government) we could free ourselves of their damn strangle hold
    on our dependence for their oil.
    But of course, the Muslim in Chef has his golf score to deal with
    and isn’t to be bothered with such details. That’s why he allows
    Bongwater Bob to vent his spleen.
    Beware……this scenario is all too close to happening here and then
    all shiite will hit the fan.
    Kid you not!

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