Egypt’s credit rating affirmed at ’B’ with stable outlook by Fitch

Investing.com -- Fitch Ratings has affirmed Egypt’s Long-Term Foreign-Currency Issuer Default Rating at ’B’ with a Stable Outlook, the agency announced Friday.

The rating is supported by Egypt’s relatively large economy, potential for strong GDP growth, and robust support from bilateral and multilateral partners. These strengths are balanced against weak public finances, high debt interest costs, large external financing needs, volatile commercial financing flows, high inflation, and geopolitical risks.

Egypt’s gross international reserves increased by $2.1 billion in the first nine months of 2025, reaching $47.0 billion. The Central Bank of Egypt’s net foreign asset position stood at $10.7 billion in August, remaining broadly stable this year. The banking sector’s net foreign asset position improved by $13.7 billion in the first eight months of 2025.

Fitch forecasts that gross international reserves will reach 4.2 months of current external payments by the end of fiscal year 2027, compared to 4.4 months at the end of FY25, close to the ’B’ median of 4.3 months.

The current account deficit is expected to narrow to 2.8% of GDP in FY27, following a 1.2 percentage point improvement to 4.2% of GDP in FY25. This improvement is driven by strong growth in remittances, which surged 66% in FY25, and tourism revenues, offsetting a widening trade deficit.

Foreign direct investment is projected to increase to an average of $15.5 billion (3.4% of GDP) in FY26-FY27, up from $13.2 billion in FY25, partly due to new real estate investment from Gulf Cooperation Council countries.

The official and parallel exchange rates have remained unified since March 2024, with no significant divergence reported. While FX demand measures likely contribute to low exchange rate volatility, Fitch does not consider that significant currency misalignment has resulted.

Geopolitical risks remain elevated, with Suez Canal receipts falling 59% since FY23 to $3.6 billion in FY25. Fitch projects these will slowly recover to $5.5 billion in FY27. Tourism revenue has remained resilient, increasing 16% in FY25.

Fitch forecasts that Egypt’s general government deficit will remain flat at 7.5% of GDP in FY26, as strong revenue and contained capital expenditure offset rising debt interest costs. The deficit is projected to narrow to 6.5% of GDP in FY27, still more than double the ’B’ median of 3%.

General government debt is expected to fall by about 4 percentage points in FY25-FY27 to 77% of GDP, remaining well above the ’B’ median of 50.6%. Debt interest as a percentage of revenue is forecast to decline to 40% in FY29 from 64% in FY26, but will still far exceed the peer group median of 15%.

Inflation has decreased to 11.7% in September from 26.5% a year earlier, due to base effects, slower food price increases, greater exchange rate stability, and tight monetary policy. Fitch projects inflation will average 12.3% in FY26 and fall to 10.4% in FY27, about double the ’B’ median of 5%.

Real GDP growth accelerated to 4.4% in FY25 from 2.4% in FY24, driven by recovering private sector investment and consumer spending. Fitch forecasts growth will increase to 4.7% in FY26 and 4.9% in FY27, close to Egypt’s potential rate.

Egypt’s banking sector remains highly liquid with a loan-to-deposit ratio of 63% in June. Fitch expects strong deposit growth to continue, with a large portion invested in government securities, providing financing flexibility for the sovereign.

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