The General Petroleum Corporation will likely have trouble seeking loans following an international credit rating agency's decision to downgrade government bonds to B3, a National Bank of Egypt official said Thursday.
Moody's cut Egypt's credit rating Tuesday, citing doubts about its ability to secure International Monetary Fund support and the economic impact of a new round of political unrest, Reuters reported.
NBE board member Mahmoud Montasser said the state-owned petroleum authority would find difficulty obtaining a US$2 billion loan it had requested from local and international banks, including the NBE, J.P. Morgan and Morgan Stanley. He also said that the Central Bank of Egypt refused to raise the authority’s credit ceiling.
According to credit rules, the NBE cannot grant additional loans to the authority since its debt has reached LE22 billion.
Political instability and economic deterioration could mean the government will be unable to fulfill its obligations to domestic and foreign creditors, Montasser predicted.
Meanwhile, public and private banks have raised interest rates on Egyptian pound deposits in a move to attract liquidity and combat the "dollarization" of the market.
The Central Bank confirmed foreign reserves are at a critical level and were below $14 million as of January.
“We aim to encourage people to save in Egyptian pounds,” said Fathi Sebaay, president of the Housing and Development Bank.
Banking expert Passant Fahmy said the credit downgrade would make foreign investors wary of government bonds and that the Central Bank would be compelled to print more banknotes to offset projected inflation.
Edited translation from Al-Masry Al-Youm