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Friday, December 8, 2023

S&P Downgrades Egypt Deeper Into Junk on Currency Shortage

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Egypt was downgraded further into junk territory by S&P Global Ratings, as the North African nation struggles with a severe shortage of hard currency.

S&P cut the country’s debt to B- from B, with a stable outlook, the ratings company said in a statement. The decision puts the country on par with nations like Bolivia, Angola and Iraq.

“The downgrade reflects the recurring delays to the implementation of monetary and structural reforms,” S&P said.

It said 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 in Friday’s statement, saying the Gulf states are putting a greater emphasis on “conditionality and achieving economic returns” in their financing decisions.

Moody’s Investors Service this month lowered Egypt’s credit score for the second time this year, bringing it to one of the lowest rungs amid what it called “increasingly constrained” policy options to rebalance the economy without triggering social unrest.

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