Fitch Ratings has maintained Egypt's long-term foreign currency sovereign rating at 'B' with a stable outlook. The rating is based on expectations of relatively high economic growth and continued strong support from international and regional partners. Egypt's economy has shown signs of improvement in its ability to withstand external pressures this year. The country's large economy, compared to other countries in the same rating category, also supports the rating.
Egypt's international reserves have increased by $5.5 billion in the first eight months of the year, reaching approximately $54.4 billion. The surplus of foreign assets at the Central Bank of Egypt rose to around $19 billion in August, an increase of $5.6 billion during the same period. These improvements indicate a positive trend in the country's economic stability. The Egyptian government has been working to strengthen its economic position.
The flexible exchange rate policy in Egypt was tested during the recent conflict, which led to the outflow of over $6 billion in foreign investments from government debt instruments. This was equivalent to about 1.4% of the country's GDP and resulted in a decline in the value of the Egyptian pound against the US dollar by more than 14%. Despite this, the Central Bank of Egypt maintained the freedom to convert currency and did not impose restrictions on foreign exchange or support the currency.
The flow of "hot money" back into the Egyptian market after the conflict helped improve the performance of the pound gradually. Fitch expects the Central Bank of Egypt to continue adopting a policy aimed at maintaining positive real interest rates after the end of the International Monetary Fund program in November 2026. This policy will be implemented in conjunction with continued exchange rate flexibility.
Despite challenges, Fitch predicts that Egypt's economy will continue to show resilience. The country's GDP grew by about 5.1% in 2026, driven by improvements in the tourism, manufacturing, and consumption sectors. However, the growth rate is expected to slow down to 4.7% in 2027, although it will remain relatively high compared to many similar economies.
Fitch also highlighted several sources of risk, including weak public finances, high debt servicing costs compared to revenues, high external financing needs, inflation, and geopolitical risks. These factors could potentially impact Egypt's economic stability. The country's ability to manage these risks will be crucial in maintaining its economic growth.
The Egyptian government has been working to address these challenges through various economic reforms and initiatives. The country's efforts to improve its economic position and maintain stability will be closely monitored by investors and rating agencies. Egypt's economic performance will likely have a significant impact on its future ratings and investment prospects.
Key points
- Egypt's sovereign rating has been affirmed at 'B' with a stable outlook by Fitch Ratings.
- The country's economy is expected to grow by 5.1% in 2026, driven by improvements in key sectors.
- Fitch highlights several risks, including weak public finances and high debt servicing costs, that could impact Egypt's economic stability.
