S&P: Egypt on watch

Standard & Poor's said it placed its B long-term foreign- and local-currency sovereign ratings on the Arab Republic of Egypt on CreditWatch with negative implications.

At the same time, the agency said it affirmed the short-term foreign- and local-currency ratings at B. The recovery rating on Egypt's senior unsecured debt is unchanged at 3 and the transfer and convertibility assessment remains B.

S&P said the CreditWatch placement reflects its view that pressures on fiscal and external indicators have heightened.

The agency said it views the dissolution of the elected parliament and the concentration of legislative power in the hands of the ruling military council, the Supreme Council of the Armed Forces, as potentially reducing the effectiveness and flexibility of the government.

The agency said it also expects tensions to remain high between the military and the parties driving the post-Mubarak political transition, including the dominant Muslim Brotherhood, which could see a further deterioration in Egypt's economic, fiscal and external performance.

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