S&P Revises Egypt’s Outlook to Stable, Citing Mounting Fiscal Pressures and Global Risks

CAIRO – 13 April 2025: S&P Global Ratings has revised Egypt’s credit outlook from positive to stable, aligning with Fitch Ratings, which also maintained a stable view of the country’s credit standing. Despite the shared outlook, both agencies continue to rate Egypt’s sovereign debt deep in junk territory — S&P at B-/B and Fitch at B — citing ongoing fiscal challenges, high borrowing costs, and exposure to global financial and geopolitical uncertainty.

The shift in outlook comes after a period of cautious optimism. In March 2024, S&P had raised Egypt’s outlook to positive following the floatation of the Egyptian pound and a notable increase in foreign currency inflows. The move reflected confidence in the government’s economic reform agenda. Later in November, Fitch upgraded Egypt’s rating for the first time since 2019, following significant external funding agreements, including a thirty-five billion US dollar deal for Ras El Hekma, an eight billion US dollar IMF program, and a seven point four billion euro support package from the European Union.

But momentum has waned as fiscal pressures have grown. S&P estimates that interest payments will consume around fifty-eight percent of government revenue in the 2024 to 2025 fiscal year, a ratio that is expected to decline only gradually. Fitch projects this figure to peak at sixty-one percent by 2026, underscoring the burden of debt servicing on public finances.

Amid tightening global financial conditions, S&P also warned that a shift in investor sentiment could lead to capital outflows from Egypt’s bond market, putting additional pressure on the local currency and complicating government financing plans.

The recent announcement of a ten percent US tariff on Egyptian exports has added another layer of risk. However, both S&P and Fitch believe the macroeconomic impact will be limited, as exports to the United States account for less than six percent of Egypt’s total exports and under zero point five percent of its GDP. In fact, some experts suggest the tariffs could present an opportunity for Egypt to attract new manufacturing investment from companies seeking to relocate to more favorable trade environments.

Despite the challenges, both rating agencies acknowledged that Egypt has made real progress on its reform agenda. S&P commended the shift to a market-driven exchange rate, which has helped improve economic competitiveness and growth potential. Fitch noted the absence of foreign exchange shortages and a narrowing gap between the official and parallel market rates — a notable achievement since the March 2024 currency adjustment.

Looking ahead, both agencies indicated that Egypt’s rating could be upgraded if the government continues to attract foreign investment, accelerate privatization, and reduce its debt burden. However, they also cautioned that any reversal in reform efforts — especially regarding exchange rate flexibility — or a return of foreign currency shortages could lead to a downgrade.

S&P also flagged the possibility of debt distress if interest payments continue to rise and force the government into a restructuring of its obligations. Meanwhile, Fitch pointed to regional instability as another concern, especially if it negatively affects tourism or Suez Canal revenues — two major sources of foreign income.

In summary, Egypt has taken important steps toward economic stabilization, but still faces serious fiscal and external vulnerabilities. Whether it can sustain reforms under growing internal and external pressures will be key to shaping its credit future.