Egypt’s government bonds fought back from an initial heavy tumble after Moody’s had downgraded the country’s credit rating to a new low and the head of the IMF had warned Cairo against delaying another currency devaluation.
Moody’s, which had been eyeing up a possible downgrade for months, concluded the process late on Thursday by cutting it one notch into the ‘substantial risk’ Caa1 bracket which is seven rungs into ‘junk’ territory.
The rating firm had cited the country’s worsening debt problems amid a bruising economic crisis that has triggered a string of devaluations, record inflation and more of its citizens to seek risky routes out of the country.
The initial market reaction saw some of the government’s international bonds, which are denominated in dollars, fall nearly 3 cents to their lowest levels since May before a rebound started and left most down just 0.2-0.5 cents.
Responding to the Moody’s cut, Egyptian Finance Minister Mohamed Maait said in a statement that the government was undertaking structural reforms to address its economic challenges and taking measures to stimulate investment.
He added that Egypt had contained spending in the financial year that ended in June, despite the knock-on effects from the war in Ukraine that have included driving up prices of key imports like fuel and some food.
