Moody’s affirms Egypt Caa1 rating on fiscal reforms

Moody’s Ratings has affirmed Egypt’s Caa1 long-term foreign and local currency issuer ratings and maintained a positive outlook, also affirming its foreign-currency senior unsecured ratings and MTN programme at (P)Caa1.

The positive outlook, in place since March 2024, reflects continued fiscal discipline and policy reforms, supporting debt affordability and lowering financing needs. Egypt has sustained sizeable primary surpluses since fiscal 2024, while the central bank prioritised disinflation and external rebalancing.

Moody’s noted ongoing vulnerabilities, including a high—but declining—debt burden, weak debt affordability, significant refinancing needs, and large contingent liabilities. Rising oil prices and tighter global financing could challenge fiscal stability, while social pressures may increase if commodity shocks erode real incomes.

The (P)Caa1 MTN programme rating of the Egyptian Financial Corporation for Sovereign Taskeek was also affirmed. The local-currency ceiling remains B1 and the foreign-currency ceiling B3, reflecting the public sector footprint and foreign currency risks.

Primary surpluses are expected to average 4 per cent of GDP, supported by tax reforms and subsidy reductions. Inflation fell to 13.4 per cent in February 2026 from 33.3 per cent in fiscal 2024. Government interest payments are projected to peak at 63 per cent of revenue in fiscal 2026, then fall to 57 per cent by 2028, with the debt-to-GDP ratio declining to 76 per cent.

Moody’s highlighted ongoing exposure to external shocks, including the Middle East conflict, which has raised energy costs and domestic fuel prices, potentially delaying fiscal consolidation. Environmental, social, and governance risks, including water scarcity, high youth unemployment, and weak governance, continue to constrain Egypt’s credit profile despite mitigation efforts.