Egypt’s feedback loop of civil unrest and economic failure is getting worse. A month after the country’s currency reserves fell by $1.4 billion, an international ratings agency is cutting Egypt’s bond rating:
The downgrade was due to the recent escalation of civil unrest in the country, highlighted by violent clashes between protesters and security forces in recent weeks resulting in many deaths, the agency said in a statement. […]Uncertainty over the $4.8 billion loan from the International Monetary Fund have also pushed the rating down, according to the statement released by Moody’s.
An economic death spiral is like a straitjacket: the more fitfully you try to get out, the tighter it gets. That seems to be precisely what civil unrest, spurred in large part by Egypt’s economic woes, is doing to the country’s economic prospects: popular riots on the ground are driving away tourism and foreign investment, which eventually harms the country’s credit rating, which worsens the economic woes, which drives more people into the streets…Uncertainty about the IMF’s loan and parliamentary elections makes the situation even worse. It’s unclear whether the government has the financial or political resources left to keep buying more time. Via Meadia is hoping for the best, but this is not looking good.