IMF Loan Delay Could Damage Egypt's Credit Rating

Egypt's request to postpone a long-awaited IMF loan due to recent political unrest could lead to a downgrade in the country's credit rating, credit rating agency Moody's said in a report.

Egypt was hit by a constitutional crisis following a 22 November decree by President Morsi which caused a political faceoff between Islamist and secular factions. He later revoked the decree. The report also hinted that the recent stabilisation of the country's external balance of payments and government finances is weakening as a direct consequence of the current political faceoff.

Moody's said the IMF loan was vital because it would boost investor confidence, raise foreign investment and reduce the budget deficit. Without the loan, Egypt could be subjected once again to external and domestic financing pressures, the report explained.

After the January 2011 uprising, Moody's downgraded Egypt's credit rating to B2, usually assigned to countries that are not creditworthy. If the IMF loan is further halted Egypt could face another credit demotion, Moody's said. The Egyptian government has claimed the loan was delayed due to the need to reach a consensus with factions opposed to the loan.