S&P lowers Egypt to B

Standard & Poor's said it lowered its long-term foreign- and local-currency sovereign credit ratings on the Arab Republic of Egypt to B from B+. At the same time, the agency said it affirmed the B short-term ratings on Egypt. The outlook is negative.

The agency said it also revised the transfer and convertibility assessment to B in line with the sovereign ratings. The recovery rating on the unsecured foreign-currency debt remains unchanged at 3.

S&P said the downgrade reflects its opinion that Egypt's external position has deteriorated and is likely to weaken further, absent stabilization in the domestic political situation alongside external financial support.

The agency said it lowered the ratings on Egypt to B+ on Nov. 24. At that time, the agency said that it could lower the ratings again if it believed that policy developments during the political transition were further weakening Egypt's ability to fund its country's external needs. In S&P's view, the agency said, external financing is becoming more problematic in the face of the related problems of sharply falling reserves, exchange rate pressures, and capital flight.

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