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Thursday, 8 October 2026dailybeirut.com
Economy
Fitch Ratings maintained Egypt’s sovereign credit rating at "B" while highlighting the resilience of its flexible exchange rate policy and foreign reserves.
Fitch Ratings has affirmed Egypt’s long-term foreign-currency issuer default rating at "B," citing the country’s demonstrated resilience in managing its flexible exchange rate regime. The agency noted that while structural strengths exist, they are counterbalanced by significant challenges, including weak public finances, high debt service burdens, substantial external financing needs, inflationary pressures, and geopolitical risks.
The ratings agency pointed to an improvement in Egypt’s foreign reserve indicators, with total international reserves rising by approximately $5.5 billion during the first eight months of 2026 to reach $54.4 billion. Net foreign assets held by the Central Bank increased by roughly $5.6 billion to stand at $19 billion as of August, while net foreign assets across the banking sector stabilized at $12.6 billion.
Fitch views this performance as evidence of Egypt’s capacity to finance current account deficits through inflows of foreign direct investment and external borrowing.
The agency described the Iran war as a genuine test for Egypt’s flexible exchange rate policy. Tensions triggered the exit of more than $6 billion in foreign investments from government debt instruments, causing the Egyptian pound to depreciate by over 14 percent against the US dollar.
Despite these pressures, Fitch confirmed that authorities did not impose currency conversion restrictions or engage in major interventions to support the local currency, thereby reinforcing monetary policy credibility. The report noted that most of the pound’s depreciation was subsequently offset as investment flows returned.
Fitch praised the resilience of the Egyptian economy, noting that growth accelerated to 5.1 percent during the 2025-2026 fiscal year, driven by tourism, export-oriented industries, and domestic consumption. However, the agency forecasts a slight slowdown to 4.7 percent in the 2026-2027 fiscal year, reflecting a deceleration in investment pace and the impact of high inflation on consumer spending.
The agency expects the current account deficit to widen to 5.1 percent of GDP in the 2025-2026 fiscal year, up from 4.2 percent in the previous year. This increase is primarily attributed to higher energy import bills and a deteriorating trade balance, despite economic support from a 10 percent rise in tourism revenues and an 18 percent increase in remittances from Egyptians working abroad.
Fitch projects the deficit will narrow to below 3.5 percent of GDP by the 2027-2028 fiscal year, supported by improvements in merchandise trade and continued growth in the tourism sector.
The report highlighted that the Iran war affected the trajectory of disinflation in Egypt, particularly through rising prices for oil, gas, and essential goods. Fitch anticipates average inflation will reach 12.3 percent in the 2026-2027 fiscal year, compared to 11.6 percent in the two preceding fiscal years.
Nevertheless, the agency suggests this spike will be temporary, with inflation returning to a downward path during 2027-2028 to fall below 10 percent. This decline is expected to benefit from exchange rate flexibility, tight monetary policy, and lower global commodity prices.
Although the Extended Fund Facility and the Resilience and Sustainability programs with the International Monetary Fund conclude in November 2026, Fitch does not anticipate any fundamental shift in current economic policies. The agency expects the continuation of existing reform trajectories beyond the program’s expiration.
