Stay positive: S&P Global Ratings decided to keep the country’s long- and short-term sovereign credit rating outlook as positive, it said in a disclosure. The rating agency pointed to “the potential for further improvements in Egypt’s external and fiscal positions” alongside its belief that the new post-float EGP will “help drive GDP growth and, over time, support fiscal consolidation” as some of the main reasons behind its decision.

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S&P also affirmed its B-/B rating — six notches into junk territory — for Egypt’s long- and short-term foreign and local currency sovereign credit.

S&P’s confidence in the country has been growing since the float of the EGP: The rating agency upgraded our outlook from stable to positive in March shortly following the float of the EGP, citing “significant steps” taken by authorities to address the country’s macroeconomic imbalances as well as FX inflows, along with the central bank’s decision to float the EGP.

A sooner-than-you-think credit rating upgrade could be in the cards: S&P says it could upgrade Egypt’s credit rating if the net government and external debt falls considerably faster than forecasted. The rating agency says this could be achieved through accelerated deleveraging or uptick in FDI driven by the state’s privatization push.

But so is a downgrade of our outlook — or even rating: The rating cautions that its outlook could be affected by the state straying from its path of macroeconomic reform, with specific reference to the flexibility of the exchange rate. A rating cut further into junk territory is also a possibility if high interest rates “prompt the government to undertake a debt exchange that we consider to be distressed” or if the rising geopolitical risks in the region start to have a larger effect on the country.

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