Standard & Poor’s rating agency has on Friday cut Egypt’s credit outlook to negative from stable. The Global Ratings, which expected continued foreign exchange shortages as aid from Gulf Arab allies deteriorate because of the slump in their oil-related revenue.
The most populous Arab country’s B- rating was maintained by S&P, putting it on par with Argentina, Greece and Pakistan. That’s five levels lower than before Arab Spring protests ended President Hosni Mubarak’s three decades in power in 2011.
“Egypt’s external and fiscal vulnerabilities might increase further over the next 12 months,” S&P said in a statement. “This could dampen the country’s economic recovery and exacerbate sociopolitical challenges.”
Egypt has seen its economy suffer amid a more than 40-percent slump in tourist arrivals since the bombing of a Russian airliner over Sinai in October, while non-oil business activity has contracted for the past seven months amid the shortage of dollars. The government is in talks to receive a pledged $2 billion deposit from the United Arab Emirates to support its foreign reserves, which cover the equivalent of 3.6 months of imports.
S&P said it may lower the rating if foreign exchange reserves decrease more quickly than currently expected, or if current account financing, including from GCC countries, become less forthcoming. “Deteriorating domestic fiscal funding options, increased political risk, or a weaker institutional environment could also lead us to lower the ratings.”