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.
Newly appointed Finance Minister Fayyad Abdel Moneim said in remarks published on the ministry website that he was preparing a series of measures to keep costs under control after the budget deficit rose to 10.1 percent of gross domestic product in the nine months to March.
Consumer inflation rose to 8.1 percent in March due to rising food and energy prices and a weak currency, separate data showed, and is expected to rise further. The central bank left interest rates on hold at a meeting on Thursday, however, saying last month's rate rise had yet to make itself felt. S&P cut Egypt's foreign and domestic long-term ratings to 'CCC+' and foreign and local short-term ratings 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. Egypt said on Wednesday that 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.
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. An IMF spokesman said on Thursday it was not planning another visit to Egypt to discuss the loan as it awaits new economic data and reform plans from the government.
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