Standard & Poor’s downgraded Azerbaijan’s sovereign credit rating to junk. The rating was cut to BB+ from BBB- with the stable outlook. The reputable rating agency assigned the Caspian country the lowest investment grade.

Experts made this decision as a persistent slump in oil prices has crippled the economy of the ex-Soviet oil exporter. General negative headwinds are also denting the economy. “Oil prices have declined further over the last several months and we now anticipate Azerbaijan’s general government will run deficits through 2018,” S&P said. “In our view, external risks are increasing, with the central bank’s foreign currency reserves declining by two-thirds from their mid-2014 peak,” the statement reads. S&P expects Azerbaijan’s economy to shrink 1 percent in 2016. Moreover, S&P analysts warn the country might plunge into a recession for the first time since 1995. The worst case scenario is quite probable considering the public budget deficit.

Interestingly, the statement with the revised credit rating was posted shortly before the talks between Azeri officials and the International Monetary Fund. The Azeri government aims to ask for a bailout loan worth €4 billion. So the downgraded rating is to undermine Azerbaijan’s morale at the talks. To make things worse, the junk grade will scare off foreign investors.