A report issued by Moody's Rating Agency warned that the recent clashes between the security forces and the Copts will raise the pressures on the Egyptian economy and reduce the confidence of investors in it. It said that the submission of resignations by the prime minister and his deputy [rejected by the Supreme Military Council] gives a negative perspective regarding the financial rating of the country.
Moody's said that it is vital for Egypt to receive international aid because of the sharp decline in its foreign reserves from $36 billion at the end of 2010 to $24 billion at the end of September. While Egypt retains the capacity to cover external debt payments for the next 12 months, the pace of decline in reserves may weaken the country's capacity to meet its obligations.
Moody's wrote that the pressure on the Egyptian economy will continue until the political uncertainty dissipates and political stability is restored.
With the withdrawal of assets by foreign investors, Egypt is resorting to short-term borrowings. The interest paid on 91-day treasury bills has reached 13.02%, the highest since 2008.
In a related news item, the foreign exchange component of the balance of payment has recorded the lowest level in four years in the fiscal year 2010-2011 as a result of declines in tourism, foreign direct investments, official transfers from countries and international organizations and on the returns on the government's foreign investment.
Source: Al-Sharq Al-Awsat, October 18, 2011; menafn.com , October 18, 2011