Morgan Stanley downgrades Egypt’s sovereign credit rating to “dislike stance”

New York-based investment banking company Morgan Stanley has moved Egypt’s sovereign credit to a “dislike stance” from a “neutral” rating and noted that the cash-strapped country will face what it termed “mounting risks” in the coming months, Bloomberg reports.

The bank argued that the upcoming December elections exacerbate the situation. The planned polls in which incumbent leader Fattah al Sisi is candidate, will complicate Egypt’s ability to push through reforms — including moving to a flexible exchange rate, a key condition in a $3 billion International Monetary Fund program.

President al Sisi Monday October 2 announced plans to seek another term in office, a move to extend his rule over the country since 2014.

The investment banking company also indicates that the threat of a downgrade from Moody’s Investors Service could send the rating deeper into junk and lead to “some forced selling.”

“In the near term, we think that Egypt lacks a positive catalyst, leaving us disliking the credit,” the bank’s strategists said.

The North African country, the bank notes, has lost favor with foreign portfolio investors who once saw it as a prime destination for hot money that kept its currency stable and boasted some of the world’s highest interest rates when adjusted for prices. However, honey moment turned sour as investors turned sharply against riskier assets with the Russian-Ukraine war last year, forcing several rounds of devaluation in Egypt that touched off inflation.

The Arab country needs $24 billion in the fiscal year through June 2024 and the amounts it is getting from foreign direct investments, portfolio inflows and asset sales have been disappointing, the bank says.