Reuters: US Dollar Report: REFILE-UPDATE 1-S&P cuts Egypt's credit rating further, cites absence of fiscal plan

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REFILE-UPDATE 1-S&P cuts Egypt's credit rating further, cites absence of fiscal plan May 9th 2013, 12:23 Thu May 9, 2013 8:23am EDT CAIRO May 9 (Reuters) - Standard & Poor's cut Egypt's credit rating further into junk territory on Thursday, saying Cairo had yet to come up with a plan to control its finances, leaving the country vulnerable to a balance of payments crisis. Egypt has been in crisis since a popular uprising ousted Hosni Mubarak in early 2011, and has run through more than $20 billion in reserves, borrowed billions more from abroad and delayed payments to oil companies to support its currency. S&P reduced Egypt's foreign and domestic long-term rating to 'CCC+' and foreign and local short-term rating to 'C' with a stable outlook. "The downgrade reflects our view that the Egyptian authorities have yet to put forward ... a sustainable medium-term strategy to manage the country's fiscal and external financing needs," the ratings agency said in a statement accompanying the downgrade. Egypt said on Wednesday its foreign currency reserves jumped by $1 billion in April to $14.43 billion, helped by a large deposit from Libya that analysts said would not resolve a currency crisis. "Ad hoc bilateral loans and deposits are serving to support Egypt's international reserve position at current low levels, buying Egypt a limited amount of time to deliver more sustainable public finances and avoid a balance of payments crisis," Standard & Poor's said. Egypt is seeking a $4.8 billion loan from the International Monetary Fund. S&P, however, said Cairo's progress on subsidies and other reforms, which are seen as a condition for IMF help, may not be enough to secure the external support Egypt needs. "We believe Egypt's foreign currency reserves could be further depleted should downward pressure on the exchange rate increase as a result of the ongoing political turmoil, expected double-digit inflation, or persistently large trade deficits," it said. In December, Standard & Poor's cut Egypt's long-term rating to 'B-' from 'B', saying another cut was possible if political turbulence worsened and undermined the country's ability to make hard choices on public finances. Link this Share this Digg this Email Reprints

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