This puts the Muslim Brotherhood run Egypt in the same category as such economic stalwarts as Pakistan and Belarus, which is also a warning that if you’re going to have your country run by crazy dictators, you should probably make sure that you have a lot of oil first.
The most-populous Arab country’s rating was lowered by one level to B-, six steps below investment grade, with a negative outlook, S&P said today. The rating, which is also on par with Pakistan, may face more downgrades should political instability result “in a sharp deterioration of economic indicators such as foreign exchange reserves or the government’s deficit,” S&P said. Egypt’s benchmark bonds were little changed.
S&P has reduced Egypt’s rating five times since the start of a popular revolt almost two years ago. The country’s credit risk jumped this month before a constitutional vote that has intensified divisions between the ruling Islamists and their opponents. The unrest led President Mohamed Mursi’s government to ask the IMF to delay a decision on a $4.8 billion loan, after getting the initial go-ahead last month.
In 2010, Egypt’s credit rating was at BBB-, a lower medium grade investment, the lowest possible level it could be at and still be investment quality. This wasn’t great, but but since then it has completely fallen out of the investment category.
The news hasn’t been any better from Moody’s. While the Muslim Brotherhood is proposing to buy Qatari gas at inflated prices as a payoff to Qatar for backing the Muslim Brotherhood’s takeover of Egypt and Syria, the country is bleeding financially and waiting around for the 4.8 billion dollar IMF loan.
The Egyptian pound is down to its lowest level against the dollar in eight years and Egyptians are scrambling to convert pounds into dollars. Currency reserves are at 15 billion, just enough to cover three months of food imports, as Egypt is a food importer. And Egyptian banks are bringing in dollars from abroad while stocks are falling.
The Muslim Brotherhood needs a bailout and the United States is the likeliest place it will get it, just as the United States bailed out the USSR during its worst periods.