Egypt scores credit rating upgrade from S&P on economic reforms and improving growth

Egypt has scored a credit rating upgrade from S&P Global Ratings, while Fitch Ratings affirmed its call on the North African nation, with both citing improving economic growth following widespread reforms.

S&P boosted Egypt's long-term sovereign credit rating by one notch to 'B', with a stable outlook, it said in a statement on Friday. That is the New York-based firm's first upgrade since the country began receiving international financial support in March 2024.

“The stable outlook balances our view of Egypt’s improving growth prospects and improving balance of payments trends against continued high government deficits and debt, including external commercial obligations,” analysts at S&P wrote.

Any further upgrade would rely on Egypt's net government and external debt positions improving much faster than expected, possibly on higher foreign direct investment supported by the government's planned sale of state assets and the opening up of sectors to diversify the economy, they said.

S&P, however, cautioned that a downgrade is likely if the government’s commitment to reforms wanes and economic imbalances such as foreign currency shortages increase again.

“We could also take a negative rating action if the elevated interest costs prompt the government to undertake a debt exchange that we consider to be distressed, or if current geopolitical and tariff-related tensions impinge on Egypt's external market access and cost of debt,” it added.

Meanwhile, Fitch, which last upgraded Egypt in November 2024, maintained its 'B' rating on Egypt, also with a stable outlook, underpinned by a “relatively large economy, fairly high potential GDP growth, and strong support from bilateral and multilateral partners”.

A 'B' rating is highly speculative and considered junk status, and is five levels below investment grade, according to both S&P and Fitch's ratings scale. An investment-grade rating makes it easier for a country to access capital markets and raise funding when it seeks to borrow.

New York-based Fitch cautioned that risks to Egypt's economy include weak public finances, which include “exceptionally high debt interest/revenue”, in addition substantial external financing needs, high inflation and geopolitical risk.

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Both S&P and Fitch cited Egypt's tourism industry as resilient, boosted by the government's reforms. It is one of the industries that S&P identified as key to economic improvement, alongside domestic demand, construction, information technology and communications, wholesale and retail trade, agriculture, and health care.

Tourism revenue, Fitch said, was up 16 per cent in fiscal year 2025. It added that Egypt also has a low direct exposure to US tariffs.

Egypt's economy has faced several challenges over the past few years, grappling with rising inflation, foreign exchange shortages and elevated debt levels.

The country has been stabilising, aided by an $8 billion loan package from the International Monetary Fund expected to boost the country's flagging economy, which has also been affected by the Israel-Gaza war.

Fitch said that the escalation of tensions between Egypt and Israel increased “only moderately” over recent months.

“Domestically, weak governance and high youth unemployment pose a lingering risk of greater social unrest and, together with the widespread role of the military, weigh on economic reform prospects,” Fitch said.

Last month, Prime Minister Mostafa Madbouly said that “the worst has passed” with regard to the country’s record high external debts, while record inflation figures have also started to ease.

Consumer prices fell in August, with the inflation level at 12 per cent, down from 13.9 per cent in July. The rate in August was the lowest since March 2022.

Egypt is also benefiting from more than $10 billion in additional funding from other multilateral donors, including €7.4 billion ($8.1 billion) from the EU.

The country was also able to secure a $7.5 billion investment package from Qatar in August, deepening bilateral co-operation across political and economic sectors.

Egypt’s construction market has also grown into the third largest in the Middle East and North Africa, with future projects valued at $565.5 billion, global property consultancy Knight Frank said in a July report.