NEW YORK: Moody’s Investors Service Thursday downgraded Egypt’s sovereign foreign currency credit rating to Caa1 from B3, citing unsettled political conditions, and said risks of a default have increased.

Egypt’s economy has been in crisis since the 2011 overthrow of Hosni Mubarak, with Islamist President Mohammad Mursi’s cash-strapped government grappling with sliding currency reserves, dwindling tourism, a soaring budget deficit and a wave of often violent street protests.

“More than two years into the Egyptian revolution, the continued unsettled political conditions have significantly weakened Egypt’s economy,” Moody’s said in a statement.

The Egyptian government’s inability to secure financing from the International Monetary Fund has exacerbated a lack of predictability in the Middle East nation’s economy and fiscal policies.

The outlook on the credit is negative, Moody’s said. Egypt is rated one notch higher at B-minus with a negative outlook by Standard & Poor’s while Fitch Ratings has the country two notches higher at B with a negative outlook.

“The sustained deterioration in Egypt’s external payments position and government finances have reached a level at which the country’s vulnerability to economic or political shocks has widened and the risk of default has consequently increased,” Moody’s said.

While the risk of a default has increased, Moody’s cautions that a default is not necessarily imminent.

“At the Caa1 rating level, the historical record shows that the average, cumulative default rate over a one-year horizon is close to 10 percent and over a five-year horizon slightly under 40 percent,” Moody’s said.