LONDON Feb 6 Egypt is at risk of a further
credit rating downgrade if the country does not manage to hold
parliamentary elections that are accepted by most political
factions, a Fitch analyst said on Wednesday.
The ratings agency cut Egypt to B from B-plus last week,
taking it deep into 'junk' territory, and warned it might cut
further. On Wednesday it said the still unscheduled
parliamentary elections and lack of progress on a loan from the
International Monetary Fund could be "triggers" for a downgrade.
"For us the key event is the parliamentary elections," said
Paul Gamble, director and Fitch's primary analyst on Egypt on a
call with analysts, noting there was no "proper guidance" on the
timing of the elections.
"An inconclusive or contentious election programme will
extend political uncertainty. While there is some tolerance of
Egypt's rating level for such political risk, it's not
unlimited," Gamble said.
Moody's placed its B2 rating for Egypt - equivalent to
Fitch's - on review for possible downgrade in January. Standard
& Poor's cut its rating to B-minus, one notch lower, in December
with a negative outlook.
An IMF loan - seen as vital to supporting Egypt's state
finances and boosting investor confidence - is unlikely to be
secured without greater political stability and in its absence,
public finances have worsened, Fitch said.
To help finance the country's budget and external deficits,
the Egyptian government is trying to pass a bill to eventually
issue $10 billion in Islamic bonds.
But Fitch was unclear about when this could go through and
the agency assumes an initial issuance of just $1 billion, if
the bill is approved.
"The $10 billion is an ambition, rather than a realistic
prospect, at least in the short term," said Richard Fox, senior
director in Fitch's sovereign rating group.
(Reporting by Dasha Afanasieva; Editing by Ruth Pitchford)