US rating agency Standard & Poor’s says Egypt’s foreign currency reserves could be further depleted by the country’s ongoing political turmoil, large trade deficits and expected double-digit inflation.
Based on this assessment, the rating agency lowered Egypt’s credit rating to CCC+/C from B-/B. The agency criticised the inability of the Egyptian authorities to put forward a sustainable medium-term strategy to manage the country’s fiscal and external financing needs.
It adds that “ad-hoc” bilateral deposits and loans are only buying Egypt “limited time” to reform its public finances. The downgrade comes as Qatar deposits $3bn in Egypt’s central bank as payment for Egyptian bonds.
Egypt’s net international reserves have fallen to approximately two months of imports, stabilising at below $15bn for the first four months of 2013.
Talks between Egypt and the Washington-based IMF surrounding a potential $4.8bn loan are continuing, but S&P say the loan will remain “elusive”, until Egypt has gained control over its finances.