S&P noted that proactive government measures, including maintaining a flexible exchange rate, adjusting fuel and electricity prices, and expanding targeted social assistance, have helped contain the initial impact of regional tensions and maintain market stability.
S&P Global Ratings has affirmed Egypt’s long- and short-term foreign and local currency sovereign credit ratings at B/B, maintaining a stable outlook, supported by exchange rate flexibility, improving foreign currency inflows, ongoing fiscal consolidation, and continued economic reforms.
In its latest report, the agency said the stable outlook reflects a balance between Egypt’s medium-term economic growth prospects and continued reform efforts on one hand, and risks stemming from prolonged regional conflict and elevated energy prices on the other.
S&P noted that proactive government measures, including maintaining a flexible exchange rate, adjusting fuel and electricity prices, and expanding targeted social assistance, have helped contain the initial impact of regional tensions and maintain market stability.
However, the agency warned that a prolonged conflict and persistently high energy prices could intensify inflationary pressures, delay further interest rate cuts, and increase debt-servicing costs, potentially limiting the government’s ability to strengthen its fiscal position.
Egypt has also exceeded the fiscal targets outlined under its International Monetary Fund (IMF) program, achieving a primary budget surplus equivalent to 4.9% of GDP in fiscal year 2025/2026.
The government has reaffirmed its commitment to IMF-backed reforms, including maintaining exchange rate flexibility, increasing domestic revenue mobilization, accelerating divestments from state-owned assets, and strengthening private-sector participation.
S&P highlighted the resilience of Egypt’s external position despite higher energy import costs, supported by strong exports, rising remittances from Egyptians abroad, sustained tourism revenues, and a recovery in Suez Canal receipts.
Suez Canal revenues reached $3.4 billion during the first nine months of FY2025/2026, compared with $2.8 billion in the corresponding period a year earlier, although receipts remained below levels recorded before the Red Sea disruptions that began in 2023.
Foreign investors’ holdings of Egyptian pound-denominated government debt securities increased to $34.5 billion in September 2026, up from $22.2 billion in April, but remained below their February peak of $39.1 billion.
The recovery in foreign portfolio inflows enabled the Central Bank of Egypt (CBE) to purchase foreign currency from the market, helping international reserve assets reach a record $54.5 billion in September, according to S&P's figures.
Meanwhile, the banking sector’s net foreign assets rose to $31.2 billion, their highest level in six years.
S&P considers banks’ positive net foreign asset position an important buffer against external shocks, potentially allowing the financial system to absorb additional capital outflows before they directly affect the central bank’s international reserves.
S&P expects disruptions across the Middle East to persist into 2027, with regional oil and gas flows remaining below pre-conflict levels through the end of next year.
Egypt is also working to diversify its crude oil import sources. Saudi Arabia accounted for 66% of Egypt’s oil imports in FY2025/2026, down from 89% in the previous fiscal year.
The agency noted that hedging contracts partially mitigate the impact of oil price volatility on Egypt’s import bill.
S&P estimates that Egypt’s current account deficit will reach approximately 5% of GDP in FY2026/2027, compared with 5.1% in the previous fiscal year and 4.2% in FY2024/2025.
The projected deficit reflects the persistence of the trade imbalance and higher energy import costs, despite strong tourism revenues, remittance inflows, and recovering Suez Canal receipts.
Egypt’s annual headline inflation accelerated to 15.2% in March 2026 before easing to 14.5% in August, compared with a 43-month low of 11.7% recorded 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 its monetary easing cycle as rising food and energy prices renewed inflationary pressures.
In September 2026, the central bank maintained its overnight deposit and lending rates at 19% and 20%, respectively.
S&P expects inflation to average 12.9% in FY2026/2027, although elevated energy prices remain a significant upside risk. The agency also anticipates a slower decline in yields on domestic government debt instruments.
Interest payments are projected to account for approximately 60% of government revenues in FY2026/2027 and 53% in the following fiscal year, down from 68% in FY2025/2026.
The agency expects inflation to average around 12% over FY2026/2027 and FY2027/2028 before declining to approximately 9% by FY2028/2029.
Egypt’s economy expanded by an estimated 5.1% in real terms during FY2025/2026, marking its strongest growth rate in three years, according to S&P.
However, the agency expects economic growth to moderate to 4.5% in FY2026/2027.
S&P attributed the previous fiscal year's strong performance to growth in non-oil manufacturing, wholesale and retail trade, information and communications technology, and tourism.
Household consumption also benefited from higher remittances from Egyptians working abroad, relatively lower inflation, and stable labor market conditions.
Looking ahead, the agency expects continued economic reforms and exchange rate flexibility to support Egypt’s competitiveness over the medium term.
S&P emphasized that sustaining strong economic growth will require faster structural reforms and greater private-sector participation.
Key priorities include reducing the size of the informal economy, improving governance, transparency, and financial disclosure among state-owned enterprises, and removing barriers to competition.
The government is preparing several companies for partial divestment through sales to investors.
Meanwhile, the CBE has discontinued subsidized lending programs for state-owned enterprises to improve credit allocation.
Authorities have also tightened oversight of the costs and financing arrangements of import-intensive public investment projects.
The government expects to generate an additional $1.5 billion from its state asset divestment program by December 2026.
Planned transactions include the sale of the state’s entire stake in the Gabal El-Zeit wind farm for $420 million, alongside partial sales of the Finance Ministry’s holdings in listed state-owned companies valued at $106 million.
Expected divestments involving Banque du Caire and Misr Life Insurance are also anticipated to generate additional resources that could be directed toward reducing public debt.
These targets follow approximately $2.2 billion in divestment proceeds generated during 2022 and 2023, as well as a $3.5 billion Qatari real estate investment transaction concluded in late 2025.
S&P noted that Egypt expanded its IMF financing arrangement to $8 billion in March 2024, with the program subsequently extended through December 2026.
The IMF completed the program’s seventh review in July 2026, allowing Egypt to receive a $1.7 billion financing tranche.
The eighth and final tranche, also worth $1.7 billion, is expected to be disbursed in December 2026.
The agency does not expect Egypt to pursue a new IMF financing arrangement after the current program expires, although it anticipates continued close cooperation through a domestically driven economic reform agenda.
Egypt also benefits from international financing and investment packages, including the European Union’s €7.4 billion support package covering 2024–2028.
The package comprises €5 billion in macro-financial assistance and budget-support loans, €1.8 billion in private-sector investment guarantees, and €600 million in development grants.
S&P also expects continued concessional financing from the World Bank, African Development Bank, and Asian Infrastructure Investment Bank.
S&P expects Gulf Cooperation Council countries to maintain financial support for Egypt, citing Cairo’s strategic importance in the region and its role in facilitating humanitarian assistance to Gaza.
The agency noted that Gulf support has increasingly shifted from deposits and unconditional financial assistance toward foreign direct investment linked to specific projects and assets.
Major investments include Abu Dhabi-based ADQ’s $35 billion commitment to the Ras El Hekma development project in early 2024.
Egypt also reached an agreement with Qatar in November 2025 involving a $30 billion investment to develop the Alam El Roum area on the North Coast over seven years.
These investments are expected to support foreign currency liquidity while contributing to economic development and private-sector activity.
S&P said fiscal consolidation measures helped reduce Egypt’s overall budget deficit to 5.8% of GDP in FY2025/2026, alongside a primary surplus of 4.9%.
Measures to broaden the tax base, improve compliance, and simplify tax dispute settlements increased government revenues by an amount equivalent to 0.9% of GDP during the fiscal year.
Increases in fuel, natural gas, and electricity prices also helped contain the energy subsidy bill at approximately EGP 196 billion, equivalent to 0.9% of GDP.
These measures were accompanied by a limited expansion of cash and in-kind assistance for vulnerable households under the Takaful and Karama social protection program.
The agency noted that this approach aims to balance spending restraint with more efficient subsidy allocation and measures to cushion vulnerable groups against rising living costs.
S&P projects that Egypt’s general government debt will decline to 87% of GDP by June 30, 2027, compared with a peak of 94% in June 2023.
The expected improvement is supported by stronger economic growth and the allocation of proceeds from state asset sales toward debt reduction.
Egypt also reduced its gross financing requirements by an amount equivalent to approximately 5% of GDP during FY2025/2026.
This was achieved partly by extending the maturity of domestic debt instruments and utilizing proceeds from the Qatari investment transaction.
The agency expects these measures to gradually ease refinancing pressures, although the government’s elevated interest burden remains a major fiscal challenge.
S&P identified Egypt’s domestic banking sector as a stable source of local currency financing for the government.
As of March 31, 2026, domestic banks held approximately 36% of outstanding Treasury bills and 63% of outstanding Treasury bonds.
The banking sector’s loan-to-deposit ratio stood at approximately 69% as of June 30, 2026, providing banks with additional capacity to extend credit to the public sector if necessary.
Resident deposits have grown at an average annual rate of 22% over the past three years, supported by expanding financial intermediation and a growing customer base within the banking system.
S&P considers the close relationship between domestic banks and the government an important source of local financing stability.
At the same time, the agency highlighted the importance of maintaining targeted support for vulnerable households as authorities continue adjusting energy prices and improving subsidy efficiency.
Overall, S&P’s decision to affirm Egypt’s sovereign credit ratings at B/B with a stable outlook reflects the economy’s ability to absorb regional shocks, supported by ongoing reforms and improved external liquidity.
Nevertheless, the country's credit profile remains dependent on maintaining exchange rate flexibility, accelerating structural reforms, reducing debt-servicing pressures, and strengthening foreign currency inflows amid persistent risks from elevated energy prices, inflation, and financing costs.
