CAIRO, Oct 12 – S&P Global Ratings has affirmed Egypt’s long- and short-term sovereign credit ratings at B/B in both foreign and local currencies, retaining a stable outlook as improved external liquidity and fiscal consolidation support the country’s credit profile.
The ratings agency said Egypt’s economic reform programme, flexible exchange rate and stronger foreign currency inflows were helping the economy withstand regional geopolitical tensions and elevated energy costs. However, it warned that persistent fiscal pressures, high borrowing costs and external financing risks continue to constrain the country’s creditworthiness.
Fiscal Consolidation Supports Credit Stability
Egypt recorded a primary budget surplus equivalent to 4.9% of GDP in fiscal year 2025/2026, exceeding targets established under its International Monetary Fund programme, according to the rating assessment.
The government has pursued measures to strengthen public finances, including broadening tax collection, raising fuel and electricity prices, advancing state asset sales and encouraging greater private-sector investment.
Higher energy prices have also helped contain subsidy expenditure, with spending on energy subsidies reported at EGP196 billion (approximately $3.72 billion), equivalent to 0.9% of GDP. Meanwhile, targeted assistance for vulnerable households has continued through programmes such as Takaful and Karama.
S&P expects general government debt to decline to 87% of GDP by June 2027, from a peak of 94% in June 2023. Economic growth and proceeds from state asset sales are expected to contribute to the reduction.
Despite this progress, debt servicing remains a significant constraint. Interest payments are projected to absorb approximately 60% of government revenue in FY2026/2027, down from 68% in the previous fiscal year, before declining further to 53% in FY2027/2028.
The agency cautioned that prolonged regional conflict and higher energy prices could increase inflation, delay monetary easing and keep government borrowing costs elevated.
Foreign Currency Inflows Strengthen External Position
Egypt’s external financial position has improved, supported by exports, remittances, tourism receipts and a gradual recovery in Suez Canal revenues.
Suez Canal receipts reached $3.4 billion during the first nine months of FY2025/2026, compared with $2.8 billion in the corresponding period a year earlier. However, revenues remain below pre-disruption levels following shipping disruptions in the Red Sea that began in 2023.
Foreign investor participation in Egyptian government securities has also increased. Holdings of local-currency government debt rose to $34.5 billion in September 2026, from $22.2 billion in April, although they remained below the February peak of $39.1 billion.
The renewed portfolio inflows enabled the Central Bank of Egypt to purchase foreign currency from the domestic market, contributing to international reserve assets reaching a reported record $54.5 billion in September.
The banking system’s net foreign assets also rose to $31.2 billion, their highest level in six years. S&P views this improvement as an important buffer against external financial shocks, including potential capital outflows.
Nevertheless, the agency expects Egypt’s current-account deficit to remain elevated, reaching around 5% of GDP in FY2026/2027 after 5.1% in FY2025/2026. Higher energy imports and persistent trade imbalances are expected to offset some of the gains from tourism, remittances and canal revenues.
Energy Prices Complicate Inflation and Interest-Rate Outlook
Egypt’s inflation rate has eased from its earlier highs but remains elevated. Annual headline inflation reached 15.2% in March 2026 before moderating to 14.5% in August, following a 43-month low of 11.7% in September 2025.
The Central Bank of Egypt reduced interest rates by a cumulative 825 basis points between April 2025 and February 2026 before pausing further cuts as food and energy prices renewed inflationary pressures.
In September 2026, the central bank kept its overnight deposit and lending rates unchanged at 19% and 20%, respectively.
S&P forecasts average inflation of 12.9% in FY2026/2027, while warning that higher international energy prices could push inflation above expectations. It expects price pressures to remain significant before gradually easing over the following two fiscal years.
The agency also expects domestic government bond yields to decline more slowly, prolonging the pressure of interest payments on public finances.
Egypt has sought to reduce its exposure to oil supply disruptions by diversifying crude suppliers. Saudi Arabia accounted for 66% of Egyptian oil imports in FY2025/2026, down from 89% in the previous fiscal year. Oil hedging arrangements provide some protection against price volatility, although they do not eliminate the risk of sustained increases in energy costs.
Growth Moderates as Private-Sector Reform Remains Critical
Egypt’s real GDP grew an estimated 5.1% in FY2025/2026, its strongest performance in three years, according to S&P. The agency expects growth to moderate to 4.5% in FY2026/2027.
Non-oil manufacturing, wholesale and retail trade, information and communications technology, and tourism supported the recent expansion. Household spending also benefited from remittances, lower inflation relative to earlier peaks and comparatively stable employment conditions.
S&P expects exchange-rate flexibility and structural reforms to support competitiveness over the medium term. However, it stressed that sustained growth will depend on stronger private-sector participation, improved governance and fewer barriers to competition.
Other priorities include formalising more economic activity, improving transparency and financial reporting at state-owned enterprises, and strengthening the competitive environment. The government has also moved to end subsidised central-bank lending programmes for state-owned companies and tighten oversight of import-intensive public investment.
The growth outlook therefore depends not only on macroeconomic stability but also on whether reforms translate into stronger private investment and more productive economic activity.
State Asset Sales Target $1.5 Billion
Egypt aims to raise an additional $1.5 billion through its state divestment programme by December 2026, according to the assessment.
Planned transactions include the sale of the government’s entire stake in the Gabal El-Zeit wind farm for $420 million and partial disposals of Finance Ministry holdings in publicly listed state-owned companies expected to generate $106 million.
Potential transactions involving Banque du Caire and Misr Life Insurance are also part of the programme, with proceeds expected to support public debt reduction.
The planned disposals follow approximately $2.2 billion raised through divestments in 2022 and 2023, alongside a $3.5 billion Qatari real estate investment agreement concluded in late 2025.
S&P considers progress on asset sales important for improving public finances, encouraging private capital and reinforcing investor confidence. The pace and execution of these transactions remain relevant to the country’s financing outlook.
IMF and International Partners Provide Financing Support
Egypt’s IMF financing programme was expanded to $8 billion in March 2024 and subsequently extended through December 2026. The IMF completed its seventh review in July 2026, unlocking a $1.7 billion disbursement, with a further $1.7 billion tranche expected in December.
S&P does not expect Egypt to enter a new IMF financing arrangement immediately after the current programme expires. It anticipates continued engagement with the Fund under a nationally directed reform programme.
International support also includes a European Union package worth €7.4 billion for 2024-2028. This comprises €5 billion in macro-financial assistance and budget-support lending, €1.8 billion in guarantees intended to encourage private investment, and €600 million in development grants.
Additional concessional financing is expected from the World Bank, African Development Bank and Asian Infrastructure Investment Bank.
Gulf investment remains another important source of foreign capital. S&P expects Gulf Cooperation Council countries to maintain engagement with Egypt because of its regional strategic importance, although financial support is increasingly taking the form of direct investment rather than deposits or unconditional assistance.
Major projects include Abu Dhabi-based ADQ’s $35 billion investment commitment to the Ras El Hekma development in 2024 and a $30 billion development agreement with Qatar for the Alam El Roum area on Egypt’s North Coast, reached in November 2025.
These investments could strengthen foreign currency availability and support economic activity, although their contribution depends on implementation and the timing of capital inflows.
Domestic Banks Remain Central to Government Financing
Egypt’s banking sector continues to provide a substantial source of local-currency funding for the government.
As of March 31, 2026, domestic banks held approximately 36% of outstanding Treasury bills and 63% of Treasury bonds. The banking sector’s loan-to-deposit ratio stood at around 69% at the end of June, suggesting capacity for additional lending.
Resident deposits have grown at an average annual rate of 22% over the past three years, supported by expanding access to financial services and a growing banking customer base.
This domestic funding base provides an important source of financing stability. However, the government’s reliance on local banks also highlights the importance of reducing borrowing costs and creating greater room for private-sector credit.
Outlook Hinges on Reform Execution
S&P’s decision to maintain Egypt’s B/B ratings with a stable outlook reflects improved foreign currency liquidity, fiscal adjustment and continued economic reforms. However, the rating remains constrained by high debt-servicing costs, inflation risks, elevated energy prices and the country’s exposure to external financing shocks.
Further improvement will depend on sustained exchange-rate flexibility, effective implementation of structural reforms, stronger private-sector investment and continued foreign currency inflows.
The stable outlook signals that S&P expects the balance of risks to remain broadly consistent with the current rating, rather than indicating that Egypt’s fiscal and external vulnerabilities have been resolved.
