Fitch Affirms Egypt’s Credit Rating at ‘B’ with Stable Outlook

Fitch Ratings has affirmed Egypt’s long-term foreign currency issuer default rating at ‘B’ with a stable outlook, citing steady progress in structural reforms and improved macroeconomic indicators despite persistent fiscal and external vulnerabilities.

In its latest report released Friday, October 10, the agency noted that Egypt’s rating reflects a balance between “its large and diversified economy, relatively strong GDP growth potential, and robust support from bilateral and multilateral partners,” against “weak public finances, exceptionally high debt servicing costs, substantial external financing needs, volatile capital inflows, elevated inflation, and ongoing geopolitical risks.”

Fitch last upgraded Egypt’s rating to ‘B’ in November 2024, recognizing the country’s efforts to stabilize its economy under an IMF-backed reform agenda.

The agency highlighted a marked improvement in Egypt’s foreign currency reserves, projecting that gross reserves will cover about 4.2 months of current external payments by the end of fiscal year (FY) 2027, compared to 4.4 months at the close of FY2025.

Fitch also observed that the unification of Egypt’s exchange rate in March 2024 has largely eliminated the gap between official and parallel market rates. “There are no significant signs of foreign exchange market distortions or backlogs,” the report said.

Headline inflation fell to 11.7% in September 2025, down from 26.5% a year earlier, driven by a stable exchange rate, slower food price growth, and tight monetary policy. Fitch expects average inflation to moderate further to 12.3% in FY2026, reflecting improved inflation expectations.

The agency also anticipates a gradual easing of interest rates, with the benchmark rate, currently at 21.5%, expected to align with a real rate of around 4% by FY2027.

Fitch projects Egypt’s fiscal deficit to remain broadly stable at 7.5% of GDP in FY2026, as solid revenue growth and restrained capital spending offset higher debt service costs.

Tax revenues jumped 35% in FY2025, supported by digital transformation, streamlined bureaucracy, and formalization incentives. The tax-to-GDP ratio is forecast to rise by 0.8 percentage points in FY2026, slightly below the government’s one-point target, and further improvements are expected to bring the deficit down to 6.5% of GDP in FY2027.

However, the agency cautioned that this remains more than double the ‘B’ category median of 3%, reflecting Egypt’s still-heavy debt burden.

Fitch warned that regional instability continues to weigh on Egypt’s external accounts. Suez Canal revenues have fallen 59% since FY2023, reaching $3.6 billion in FY2025, due to disruptions from regional conflict. The agency expects a gradual recovery to $5.5 billion by FY2027 as shipping routes stabilize.

In contrast, tourism revenues remain resilient, climbing 16% in FY2025, while energy cooperation and foreign investment have continued despite heightened regional tensions. Fitch also noted that U.S. tariff measures pose “direct exposure risks” to Egypt’s trade flows.

Domestically, Fitch identified weak governance, youth unemployment, and the outsized economic role of the military as enduring obstacles to long-term reform. These factors, the agency said, “continue to weigh on Egypt’s investment climate and could heighten social unrest risks.”

Despite these challenges, Fitch maintained confidence in Egypt’s medium-term growth prospects, emphasizing that “sustained policy implementation and external support” will remain key to preserving stability and improving the nation’s credit profile.