The outlook for Egypt’s banking system remains negative because of political instability and the increasing exposure of banks to the indebted government, ratings agency Moody’s said on 25 February. This negative outlook for the bulk of Egyptian banks is unchanged since the beginning of the political turmoil in the country in January 2011.

Moody’s said that although Egypt is heading towards elections (see p19), the government remains locked in a confrontation with the Muslim Brotherhood, which is backed by ousted president Muhammad Mursi. Moody’s adds that given the poor outlook for foreign investment, tourism and consumer confidence, Egypt’s banks will be faced with subdued credit growth and low level of business generation. Cairo, which continues to rely on local banks to fill the funding gap in the absence of foreign funding, is running high budget deficits, Moody’s notes. (CONTINUED - 364 WORDS)