Thursday, Aug 23, 2012
By Melodie Warner
Standard & Poor's Ratings Services removed Egypt from Negative Credit Watch and rated its outlook as negative, citing uncertainties over the government's political goals and the status of key state institutions.
A country is put on Negative Watch when it is under review for downgrade, while a negative outlook is a long-term view where the rating might go.
But the ratings company also affirmed Egypt's long- and short-term foreign currency ratings of B, which is five steps into junk territory. S&P said it believes Egypt's dominant political group--the Muslim Brotherhood--and the senior ranks of the Egyptian military are moving toward a working arrangement, which may address some of the country's pressing structural challenges.
The firm said domestic unrest could resurface when the new constitution is drafted, or when new parliamentary elections are held. If political or social tensions were to escalate again, S&P said it could lower the rating.
On Wednesday, Egypt formally requested $4.8 billion from the International Monetary Fund. The loan request marks an increase from previous negotiations for a loan of $3.2 billion that Egypt's military leadership rejected last year.
Egypt's diminishing foreign-currency reserves pose the most immediate economic threat to the country, say many economists. After persistent instability frightened off investors and tourists following Egypt's revolution early last year, Egypt's central bank bled through nearly two-thirds of its foreign cash to prop up the Egyptian pound.
--Matt Bradley contributed to this article.
Write to Melodie Warner at melodie.warner@dowjones.com
(END) Dow Jones Newswires
23-08-12 1452GMT
