Ratings house Standard & Poor's said it lowered Egypt's long-term foreign and local currency ratings from B+ to B on Friday because of a sharp decline in foreign currency reserves and ongoing concerns about political stability. S&P, which cut the rating in November for similar reasons, said the outlook was negative.
"In our view, Egypt's external financing risks have risen significantly, with foreign direct investment having declined sharply and net portfolio flows also having turned negative," S&P said. It said central bank intervention to support the Egyptian pound has resulted in a sharp decline in net international reserves to $16 billion at end-January 2012 from $36 billion at the start of 2011. As a result, S&P estimated that net international reserves, excluding gold, "now cover less than three months of goods and services imports compared with more than six months at the start of 2011."
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