Fitch maintains Egypt’s ‘B’ credit rating with stable outlook

CAIRO - 11 October 2025: Fitch Ratings has affirmed Egypt’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook, citing improved external buffers, gradual fiscal consolidation, and continued international support, though warning that public debt and inflation remain key vulnerabilities.

In its latest sovereign rating review, Fitch said Egypt’s large and diversified economy, coupled with support from Gulf and multilateral partners, continues to underpin its credit profile. However, these strengths are tempered by high debt-servicing costs, persistent inflation, and exposure to geopolitical risks.

External Position Strengthens

The agency reported that gross international reserves rose by $2.1 billion in the first nine months of 2025, reaching $47 billion, supported by foreign inflows linked to the Ras El-Hekma investment deal and stronger remittances. The current account deficit is projected to narrow to 2.8 percent of gtoss domestic product (GDP) by FY2027, helped by a 66 percent surge in remittances and solid tourism performance, even as the trade deficit remains wide.

Foreign direct investment is expected to average $15.5 billion in FY2026–FY2027, up from $13.2 billion in FY2025, driven by new Gulf real estate and infrastructure projects. Fitch noted that the foreign exchange market has remained stable since the currency unification in March 2024, with no reported backlogs or significant parallel-market divergence.

Growth Picks Up, Inflation Cools

Egypt’s real GDP growth strengthened to 4.4 percent in FY2025, from 2.4 percent a year earlier, reflecting a recovery in private sector investment and household consumption. Fitch forecasts growth to reach 4.7 percent in FY2026 and 4.9 percent in FY2027, aligning with the country’s long-term potential.

Inflation slowed to 11.7 percent in September, down from 26.5 percent a year ago, supported by tighter monetary policy and a stable exchange rate. The agency expects inflation to average 12.3 percent in FY2026, easing further to 10.4 percent in FY2027, though still above the median for similarly rated peers.

Fiscal Pressures Remain Elevated

Fitch projects the budget deficit will remain steady at 7.5 percent of GDP in FY2026, before narrowing to 6.5 percent in FY2027 on the back of stronger revenues and moderation in interest costs. Egypt’s public debt is forecast to decline by roughly four percentage points to 77 percent of GDP by FY2027, still well above the ‘B’ category median of 50.6 percent.

The report highlighted that tax revenues rose 35 percent in FY2025, driven by digitalization and compliance reforms, while a cap on public investment helped contain spending. However, Fitch cautioned that fiscal discipline could be tested by political and social pressures.

Geopolitical and Structural Headwinds

Fitch said the ongoing regional conflict has sharply reduced Suez Canal revenues by 59 percent since FY2023, to $3.6 billion in FY2025, though a gradual rebound to $5.5 billion by FY2027 is expected. Tourism receipts, meanwhile, have remained resilient, increasing 16 percent in FY2025 despite the challenging environment.

Structural reforms have progressed slowly, the agency added, noting steps to improve governance of state-owned enterprises but limited progress in privatization efforts.

Banking Sector Solid, Governance Risks Persist

Egypt’s banking sector remains liquid and well-capitalized, with a loan-to-deposit ratio of 63 percent as of June. Fitch expects deposit growth to continue supporting sovereign financing needs, while lower interest rates are projected to normalize profitability levels.

However, the agency maintained a high ESG Relevance Score of 5 for political stability, institutional quality, and corruption control, underscoring the governance challenges that continue to weigh on Egypt’s credit profile.

Fitch concluded that its affirmation reflects a delicate balance between economic stabilization and structural weaknesses, with fiscal and external positions improving but still vulnerable to shocks and reform delays.