S&P Global upgrades Egypt’s outlook to positive

S&P Global Ratings upgraded Egypt’s outlook to positive in March, maintaining its B-/B long and short-term foreign and local currency sovereign credit ratings, according to data released on Monday.

The transfer and convertibility assessment remains at B-.

This deviation from the publication schedule is attributed to exchange rate liberalisation and increased foreign currency inflows.

The positive outlook reflects potential improvement in Egypt’s external position and currency supply, pushed by market-driven exchange rates, boosting GDP growth and supporting fiscal plans.

According to the report, upside scenarios include faster debt reduction or foreign investment, while downside risks include a wavering commitment to reforms or persistently high-interest costs.

Notably, key factors contributing to the rating exchange include an exchange rate adjustment and significant foreign investment.

Expectations include increased reserves and reduced debt service costs, with challenges like Suez Canal disruptions.

Reforms aim to boost private sector involvement, reduce the economic dominance of the state, and control inflation. Although sociopolitical fragility persists, economic diversification efforts continue, supported by external investments.

Flexible exchange rates are expected to moderate current account deficits, although inflation remains high. Egypt’s fiscal consolidation efforts are ongoing, buoyed by tax reforms and spending controls. Despite challenges, the banking sector remains resilient, adapting to economic shifts and managing risks.