Moody's on Thursday downgraded Egypt's credit rating by one notch, saying the country's financial conditions have deteriorated as the transition to a civilian government remains uncertain. The agency cut Egypt's rating to B1 from Ba3 and maintained a negative outlook on the rating, a sign that further downgrades are possible in the next couple of years. The primary reason for the downgrade, Moody's said, "is the ongoing economic weakness and financial deterioration, which has deepened further since the onset of the country's popular revolution in January 2011." Clashes between protesters and the army left 25 people dead earlier this month in Cairo, in the worst outbreak of violence since the ousting of President Hosni Mubarak in February. The army council now in power has pledged democracy but calls have grown for a faster transition to civilian rule. The interim cabinet is under heavy pressure to solve Egypt's social ills and restore the confidence of investors. "Unsettled political conditions have further undermined economic performance and investor confidence in Egypt," Moody's said, expressing concerns about the sharp loss in government foreign reserves since the beginning of the year. This was the second time Egypt got downgraded by a major credit agency in the past 10 days. Standard & Poor's last week cut the country's rating by one notch to BB-minus, still one level above Moody's B1. Fitch still rates Egypt at BB -- the highest rating given to the country by the big-three agencies -- with a negative outlook.
