(Bloomberg) -- Egypt’s credit score was lowered by Fitch Ratings deeper into junk territory, a decision that follows downgrades to a similar level from its peers as the cash-strapped country wrestles with its worst economic crisis in decades.
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This year’s second downgrade by Fitch lowered Egypt’s rating by one step to B-, putting it six levels above default and on par with Nigeria and Bolivia. The outlook is stable, according to a statement Friday.
“The downgrade reflects increased risks to Egypt’s external financing, macroeconomic stability and the trajectory of already-high government debt,” Fitch analysts led by Laure de Nervo wrote, citing slow progress on reforms and delays on a program review with the International Monetary Fund as some of the reasons for the move.
The latest bleak assessment means the government will struggle to regain access to international capital markets as the $470 billion economy suffers a severe shortage of foreign exchange. Egypt has devalued its currency three times since early 2022, with inflation soaring and the pound losing almost half its value.
Moody’s Investors Service and S&P Global Ratings also lowered the North African nation deeper into junk territory last month, citing concerns that include its high external financing requirements and delays in enacting economic reforms.
Read More: Egypt Clears One Hurdle for IMF Review, Faces Other on Currency
The International Monetary Fund, which agreed on a $3 billion rescue deal with Egypt last year, wants to see further exchange-rate flexibility before it signs off on a crucial program review. But a currency move is politically difficult ahead of December elections, in which President Abdel-Fattah El-Sisi is likely to extend his rule until 2030.
The pound has been trading at Egyptian banks close to 31 per dollar for months, far below the rate of 46 at which it changed hands in recent days on the local black market. The IMF’s Managing Director Kristalina Georgieva said last month the country would “bleed” precious reserves unless it devalues again.
Read More: Egypt Seeks to Boost IMF Loan Over $5 Billion Amid Currency Woes
Authorities are in talks with the Washington-based lender on boosting its loan to over $5 billion, people familiar with the discussions told Bloomberg last month. Only a small portion of the $3 billion has been lent so far.
Egypt has lately turned to Asia to raise capital as part of borrowing guaranteed by development institutions. The government issued around $500 million of debt in Japan’s domestic bond market this week, adding to last month’s deal for about $500 million via a Chinese yuan-denominated bond.
--With assistance from Zijia Song.
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