S&P Global Ratings upgraded Egypt’s long-term sovereign credit rating to B from B-, the first upgrade since 2018, while affirming its short-term rating at B, according to a report from the rating agency seen by EnterpriseAM. The decision reflects the “significant improvement in the Egyptian economy in light of structural reforms, the liberalization of the exchange rate, the increase in foreign direct investment, and the improvement of indicators,” Finance Minister Ahmed Kouchouk told EnterpriseAM.

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The agency points to international confidence in the country’s reform agenda, supporting its rationale by noting that the float of the EGP led to “GDP growth rebounding sharply” in the previous fiscal year. The rating agency adds that the wider reform agenda has also increased tourism revenues and remittances and improved fiscal metrics.

The post-float uptick in FDI along with IMF and other donor support have helped ease FX reserve and liquidity concerns, no more so than with the landmark USD 35 bn Ras El Hekma agreement. S&P sees net flows offsetting current account deficits until the end of the fiscal year 2027-2028 and usable reserves hitting USD 42 bn in the same period. Net external debt is seen falling to an average of 84% of current account receipts in the same time frame, down from an average of 134% in the four-year period ending in FY 2023-2024.

Looking ahead, commitment to a flexible currency and the IMF’s role as a “policy anchor” will lead to more growth and better fiscal indicators until the fiscal year ending 2028, even with “global tariff-related volatility and regional geopolitical risks,” according to S&P.

The rating agency also posted a stable outlook, citing “improving growth prospects and

improving balance of payments trends” that have to be balanced against sizable deficits and debts.

S&P could be persuaded to upgrade its outlook if there’s a quicker-than-expected fall in net government and external debt, “perhaps via an accelerated pace of deleveraging or higher FDI supported by the planned sale of state assets. We could also raise the rating should policies to diversify the economy and open up key sectors to foreign investment benefit the Egyptian economy, including the quality of external financing.” However, the agency warns that it could move to downgrade its outlook if FX shortages return and the government diverts from its reform agenda. Negative rating actions could also be prompted by several other factors. These include Egypt undertaking a debt exchange that S&P views as distressed, or tariff-related and geopolitical disruptions that affect external market access and the cost of debt.

Fitch Ratings also revisited its position on our sovereign debt over the weekend, reaffirming its B rating and stable outlook. Fitched noted the country’s relatively large economy, GDP potential, and continued support from international partners, but it warned of weak public finances and elevated debt service costs.

The Finance Ministry was keen to say that it has no plans on backtracking on reform progress, with the government committed to “enhancing investor confidence, expanding the tax base, supporting fiscal discipline, reducing debt ratios, boosting spending on social protection and human capital, maintaining low inflation rates, and achieving comprehensive and sustainable growth for the Egyptian people, led by an active and competitive private sector,” Kouchouk told EnterpriseAM.

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