Fitch: Flexible Exchange Rate Helped Egypt Withstand Impact of Iran War

Fitch Ratings said Friday that Egypt’s flexible exchange rate policy has strengthened the country’s ability to absorb the economic fallout from the Iran war, helping preserve confidence in economic policymaking and limiting pressure on the country’s sovereign credit profile.

In its latest assessment, Fitch maintained Egypt’s sovereign credit rating at “B” with a stable outlook, citing improved resilience in foreign exchange management and stronger external liquidity conditions.

The agency said capital inflows played a key role in supporting foreign currency reserves and stabilizing the domestic use of the U.S. dollar, despite regional geopolitical tensions and volatility linked to the conflict involving Iran.

According to the report, Egypt’s net international reserves remained stable at more than $53 billion by the end of April, reflecting continued foreign currency availability and improved liquidity conditions in the local banking system.

Fitch also highlighted the resilience of remittance inflows from Egyptians working in Gulf countries since the outbreak of the war. Citing data from the Central Bank of Egypt, the agency said remittances rose by 30% year-on-year during the first half of the 2026 fiscal year, reaching approximately $22 billion.

The report viewed the exchange rate’s flexibility as a central factor in reinforcing the credibility of Egypt’s economic reforms, particularly as authorities continue efforts to stabilize inflation, attract foreign investment, and manage external financing pressures.

Egypt adopted a more market-driven exchange rate framework as part of broader economic reforms backed by international lenders, including the International Monetary Fund. Analysts say the policy has helped cushion external shocks that previously strained the country’s balance of payments and foreign currency market.