Moody’s: Egypt Request to Delay IMF Loan Board Meeting Is Credit Negative

In a report issued today, rating agency Moody’s said Egypt’s request to the International Monetary Fund (IMF) to delay talks until domestic consensus is achieved is credit negative.

The rating agency further added that the country is at a critical stage and that Egypt might face challenges in the sale of new debt similar to the post-revolution period in 2011, according to Pharos Securities report.

A vital $4.8 billion International Monetary Fund loan to Egypt will be delayed until next month, its finance minister said on December 11th, intensifying the political crisis gripping the Arab world’s most populous nation.

As rival factions gathered in Cairo for a new round of demonstrations, Finance Minister Mumtaz al-Said said the delay in the loan agreement was intended to allow time to explain a heavily criticized package of economic austerity measures to the Egyptian people.

The announcement came after President Mohamed Morsi on Monday backed down on planned tax increases, seen as vital for the loan to go ahead, within hours of their being announced. Opposition groups had greeted the tax package, which included duties on alcoholic drinks, cigarettes and a range of goods and services, with furious criticism.

“Of course the delay will have some economic impact, but we are discussing necessary measures (to address that) during the coming period,” the minister told Reuters, adding: “I am optimistic … everything will be well, God willing.”

Prime Minister Hisham Kandil added: “The challenges are economic not political and must be dealt with aside from politics.”

“The delay is alarming given Egypt’s current economic woes and means that political uncertainty could lead to further delays,” Mona Mansour, chief economist at Cairo-based investment bank CI Capital Holdings, said by phone. “This will add further pressure on reserves and further depreciation of the Egyptian pound is expected.”