(Bloomberg) — Egypt was downgraded for the second time this month, as the North African nation struggles with a severe shortage of hard currency.
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S&P Global Ratings, cut the country’s debt deeper into junk territory, to B- from B, albeit with a stable outlook. The decision puts the country on par with nations such as Bolivia, Angola and Iraq.
The move follows that of Moody’s Investors Service, which lowered Egypt one level to Caa1 in early October, triggered a further sell-off of Egyptian bonds. S&P’s rating for Egypt is now one notch above that of Moody’s.
“The downgrade reflects the recurring delays to the implementation of monetary and structural reforms,” S&P said late Friday. Those delays are “exacerbating imbalances in the currency market, deteriorating the net foreign asset position of systemic banks, and delaying critical IMF disbursements and other multi-and bi-lateral financing.”
S&P lowered Egypt’s outlook to negative in April, saying risks had increased that its allies in the wealthy Gulf Arab states would delay or refuse to provide funds.
It reiterated that concern on Friday, saying the Gulf states are putting a greater emphasis on “conditionality and achieving economic returns” in their financing decisions.
Read More: Egypt’s Credit Outlook Lowered to Negative by S&P as Prices Soar
The economic fallout of Russia’s invasion of Ukraine last year hammered Egypt’s finances, causing a rapid outflow of billions of dollars in foreign funds and leading inflation to soar.
Moody’s, when it made its downgrade, said Egypt had “increasingly constrained” policy options to rebalance the economy without triggering social unrest.
Read More: Egypt Clears One Hurdle for IMF Review, Faces Other on Currency
Egypt is struggling to pass the International Monetary Fund’s delayed reviews of a $3 billion rescue program and bond investors are worried about a default. The Washington-based lender wants to see authorities allow true flexibility in the currency before disbursing more money.
The North African nation is in talks with the IMF on boosting its loan to over $5 billion, people familiar with the discussions told Bloomberg last week. Only a small portion of the $3 billion has been lent so far.
Read More: Egypt Seeks to Boost IMF Loan Over $5 Billion Amid Currency Woes
Egypt has devalued the pound three times since early 2022, leading it to lose almost half its value against the dollar. Still, the IMF’s managing director, Kristalina Georgieva, said Egypt will “bleed” precious reserves unless it devalues again.
A currency move is politically difficult ahead of December elections, which President Abdel-Fattah El-Sisi is likely to win. In June, the president appeared to reject another devaluation, warning of the toll that faster inflation would take on Egypt’s 105 million people.
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