The country’s economy received a new blow as the Standard & Poor’s rating agency lowered the Egypt’s credit rating from B+ to B in the long term. The move is attributed to a decline in Egypt’s foreign exchange reserves, which fell from $36 billion in December 2010 to only $16.3 billion this past January.
The agency will maintain its negative assessment if the Egyptian government fails to stop the decline in its reserves, and if the political transition process results in an ambiguous atmosphere.
According to the a statement from the S&P, finding external funding is becoming increasingly difficult in the face of problems associated with the sharp decline in reserves, exchange rate pressures, and the flight of foreign capital.
This statement comes at a time of anticipation, as Robert Zeollick, President of the World Bank, expects tensions to increase between Egypt and the Bank regarding the country’s request for financial assistance. Zoellick indicated that the country will have to meet the Bank’s demands regarding the establishment of a democratic process in Egypt.
According to Dr. Ehab El-Desoki, a professor of international economics, the World Bank president’s statement must be linked to the existing tension between Egypt and the United States over the issue of foreign funding for civil society organizations. The US is the largest shareholder in the World Bank and the IMF. The Egyptian government recently raided a number of non-governmental organizations, including three American organizations, confiscating the contents of their offices last December.