Egypt’s long-term foreign currency debt was downgraded by Fitch Ratings, which pointed to a decline in central bank reserves and uncertainty over possible International Monetary Fund support.
Fitch lowered the rating to BB-from BB with a negative outlook. The long-term local currency rating was cut to BB from BB+, it said in an e-mailed report today.
Egyptian central bank reserves fell 44 percent in 2011 as the central bank sought to keep the local currency stable with investment and tourism falling. Reserves fell to about $20 billion in November, from $36 billion at the end of 2010, Fitch said today.
Policy makers in the north African country are trying to manage unrest even as borrowing costs rise after the popular revolt that ousted President Hosni Mubarak in February.
“Although reserves remain above three months of current external payments, the pace of decline is a concern,” Fitch analyst Richard Fox wrote in the report. Alternative sources of funding such as an IMF program have “been promised but await definitive decisions by the government.”
Egyptian public finances have also weakened, Fitch said. Government debt is likely to rise to 80 percent of gross domestic product in 2012 and this year’s budget deficit will exceed the goal of 8.6 percent of GDP, it said.