Fitch affirms Egypt’s credit rating at ‘B’, stable outlook

Fitch Ratings has on Friday affirmed Egypt’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook. The rating agency cited improvements in macroeconomic stability and ongoing support from international partners, while warning of persistent fiscal and external vulnerabilities.

The rating reflects Egypt’s large economic base and growth potential, alongside strong backing from Gulf Cooperation Council (GCC) countries and multilateral lenders. These positives are tempered by high debt servicing costs, elevated inflation, and geopolitical risks.

Fitch noted that Egypt’s international reserves have grown by $12.4 billion since early 2024, reaching $45.5 billion in March, supported by foreign investment in the Ras El-Hekma development and increased non-resident participation in local debt markets. However, the banking sector’s net foreign asset position dipped into deficit again in early 2025, limiting exchange rate volatility despite capital outflows.

The agency expects Egypt’s current account deficit to widen slightly to 5.6 per cent of GDP in FY25 before narrowing to 4.0 per cent in FY26. Foreign direct investment is projected to rise to $15 billion in FY26, aided by continued GCC-backed real estate investment.

Risks from regional conflict remain high, particularly due to the sharp drop in Suez Canal revenues, which Fitch expects to recover only partially by FY26. Tourism, by contrast, has shown resilience, growing 5 per cent in FY24, with further gains projected.

Egypt’s fiscal deficit is expected to widen to 7.4 per cent of GDP in FY25, driven by high interest costs and the one-off Ras El-Hekma revenue in FY24. The government aims to implement additional tax measures in FY26 to support revenue and narrow the deficit.

Fitch projects general government debt will decline to 80.4 per cent of GDP by FY26, from 89.4 per cent in FY24. Inflation, which has fallen sharply from 33.4 per cent in March 2024 to 13.6 per cent in March 2025, is expected to rise temporarily to 14 per cent before easing again.

Looking ahead, the agency forecasts real GDP growth to accelerate to 4.0 per cent in FY25 and 4.7 per cent in FY26, with moderate progress expected on structural reforms under the IMF-supported programme.

Fitch’s sovereign rating model assigned a ‘B-’ rating, but the agency applied a one-notch upward adjustment for improvements in macroeconomic policy, particularly the FX regime and inflation.

The Country Ceiling remains at ‘B’, indicating no major constraints on capital or currency transfers for debt servicing.

Attribution: Amwal Al Ghad English