Some bankers assured the necessity of achieving a relative improvement in the political and security statuses in the upcoming period because of being main determiners of the economic status. A relative improvement is necessary to avoid more lowering of Egypt’s credit ratings as Standard & Poor’s Ratings Services today lowered its long-term foreign- and local-currency sovereign credit ratings on Egypt to ‘B’ from ‘B+’ (5 grades more to the high risk area).
Bankers expected that this retreat will affect interest rates and conditions determined by International Monetary Fund (IMF) and World Bank (WB) in the current negotiations performed with Egypt over the IMF US$ 3.2 billion loan and WB US$ one billion loan. S&P lowered its ratings on Egypt due to the falling foreign reserves and the unstable political status
El-Sayed El-Kaseer, chairman of Industrial Development & Workers Bank, said that this credit lowering is temporarily due to the current turmoil Egypt is witnessing as revenues and dollar resources retreated which negatively affected foreign reserve, as it fell by more than US$ 20 billion since January 2011.
El-Kaseer stressed the necessity of fostering stability in political and security statuses in order to avoid more retreats in the credit ratings, as this will increase the cost of all foreign deals with banks including foreign borrowing, banking services and importing.
Mohamed Badra, Cairo Bank board member, said that the reduced credit ratings will worsen Egypt’s situation in the negotiations over IMF and WB loans, noting that this will be affect negatively the terms and interest rates determined by the lenders. S&P justified this retreat, Badra added, due to the continuing sharp falling of Egypt’s foreign reserves along with the uncertainty of having foreign reserves recovery. Badra assured the necessity of improving the political and security statuses to avoid more credit ratings retreats.