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Egypt Downgraded as Ominous Summer Nears


Egypt received its sixth Standard & Poor’s downgrade since the fall of the Mubarak government yesterday. The drop of its short- and long-term credit rating from B to C territory is only the latest failure to befall the government of President Mohamed Morsi. His administration is now presiding over an economic and social tragedy so ruinous that we wouldn’t be surprised to see an increase in Mubarak nostalgia in Egypt. The FT reports:

“The downgrade reflects our view that the Egyptian authorities have yet to put forward—either to the Egyptian population or the international donor community—a sustainable medium-term strategy to manage the country’s fiscal and external financing needs,” S&P wrote in a note. “As a result, we expect financing pressures to remain elevated and comprehensive donor support, including from the International Monetary Fund, to remain elusive.”

The bad news in Egypt is snowballing. Since the revolution began, the country’s currency has plunged nearly 25 percent against the dollar, and its foreign currency reserves have plummeted by 60 percent. Even as inflation and slow growth further wreck Egypt’s economic prospects, Morsi and his Muslim Brotherhood allies still have not agreed to a badly needed financing deal with the IMF, opting instead to legalize “sukuk,” debt instruments that comply with Islamic law. So far, no one is impressed.

Meanwhile the number of robberies and homicides has skyrocketed, tourism is moribund, and a widely expected food shortage is approaching. This summer promises to be a very ugly one for Egypt—the worst chapter yet in the post-Mubarak era. The Muslim Brotherhood has shown it can win elections but has a poor track record when it comes to actual governance.

Mark Egypt as another “no good option” quandary in the Middle East. We can’t imagine anyone in the White House is looking forward either to bailing out the Muslim Brotherhood or to letting Egypt sink further into the abyss.

[Egyptian flag image courtesy of Shutterstock]

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  • Pete

    ” …either to bailing out the Muslim Brotherhood or to letting Egypt sink further into the abyss.”

    Why does the academic elite seem to think that the US taxpayer should be expected to bail out places like Egypt??

    Such countries will never be self sufficient. Shouldn’t they be allowed to sink to their natural level.

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