Moody’s Lifts Egypt to B3 With a Positive Outlook as Debt Sheds 13.4 Points of GDP Since 2023

By The Edge Research Team

Moody’s Ratings upgraded Egypt’s long-term local and foreign-currency issuer ratings to B3 from Caa1 on 16 October and kept the outlook positive, crediting fiscal consolidation and structural reforms that have set government debt and interest costs on a declining path. Government debt came to 81.8 percent of GDP in June 2026, down from 95.2 percent in June 2023, a reduction of 13.4 percentage points in three years, or 4.5 points a year on average, on our calculation. The agency also raised the rating on the government’s medium-term note programme, and on the programme of the Egyptian Financial Company for Sovereign Taskeek, to (P)B3 from (P)Caa1.

A Primary Surplus More Than Triple the 2023 Level

The budget sector’s primary surplus, the balance before interest payments, reached 4.9 percent of GDP in fiscal 2026, the year to June, against 3.5 percent in fiscal 2025 and 1.6 percent in fiscal 2023. That is 3.06 times the fiscal 2023 level and 1.4 percentage points above the year before, on our calculation. Excluding one-off revenue the surplus was 4.1 percent, which puts one-off receipts at 0.8 points of GDP on our calculation, and that underlying figure still stands above the 3.5 percent reported for fiscal 2025.

Tax revenue reached 13.0 percent of GDP in fiscal 2026, which the agency tied to stronger compliance, the removal of exemptions and wider digital administration, without an increase in the effective tax burden. Non-interest spending eased to 10.6 percent of GDP from 10.9 percent. On our calculation, tax receipts alone now exceed all non-interest spending by 2.4 percentage points of GDP.

The IMF’s own figures point the same way. When its Executive Board completed the seventh review of Egypt’s 48-month Extended Fund Facility on 30 July 2026, the Fund projected a primary surplus of 4.8 percent of GDP for fiscal 2025/26, rising to 5 percent in fiscal 2026/27. The July review let Egypt draw SDR 1.11 billion under the Extended Fund Facility and SDR 200 million under the Resilience and Sustainability Facility, SDR 1.31 billion in all, on our calculation.

Egypt’s Fiscal and External Turn

Figures as stated in the 16 October rating action. Fiscal years end in June; fiscal figures are for the budget sector unless marked general government. Changes are our calculation.

Debt and Interest Costs on a Declining Path

The debt reduction came from three sources, according to the statement: the fiscal adjustment itself, sustained economic growth and the real appreciation of the Egyptian pound. Interest absorbed just under 67 percent of budget revenue in fiscal 2026, in the agency’s words, down from an all-time high of 73 percent in fiscal 2025, a decline of more than 6 percentage points in a single year on our calculation. On a general government basis the ratio is estimated at 59 percent, from 63 percent.

The agency sees primary surpluses slightly below 5 percent of GDP over the medium term, broadly in line with the government’s budget plan for fiscal 2027. It projects government debt just below 70 percent of GDP and interest at 50 percent of general government revenue by the end of the decade. Reaching those levels means a further reduction of more than 11.8 points of GDP in the debt ratio from June 2026 and of 9 points in the general government interest ratio from the fiscal 2026 estimate, on our calculation.

The rating committee met on 12 October. The statement records that Egypt’s institutions and governance strength had increased materially and that the country had become less susceptible to event risks, while economic strength and fiscal strength had not changed materially. On our reading, the committee recorded the improvement under institutions and governance and event risk rather than under fiscal strength, even though fiscal consolidation is the driver the agency names first.

Reserves Rise to 57 Billion Dollars

Net international reserves rose to 57 billion dollars in September 2026 from 52 billion at the end of 2025, a gain of 5 billion dollars in nine months on our calculation. The Central Bank of Egypt’s own provisional figure, published on 7 October, puts net international reserves at 57,348.2 million dollars at the end of September. Under the reform of Egypt’s monetary policy framework since March 2024, the agency notes, the currency has adjusted without depleting official foreign-currency buffers, unlike in 2022. At the start of the Middle East conflict in February 2026, the central bank absorbed temporary capital outflows without a significant loss of reserves. Remittances and tourism receipts through official channels increased significantly, offsetting weaker Suez Canal receipts. The Fund put gross international reserves at 119 percent of its reserve adequacy metric at end-June 2026.

The country ceilings moved up with the sovereign. The local-currency ceiling rose to Ba3 from B1, three notches above the new rating, and the foreign-currency ceiling to B2 from B3, two notches below the local-currency ceiling and therefore one notch above the sovereign rating, on our calculation.

Egypt’s Ratings Across the Three Agencies

Interest ratios are each agency’s own general government or government measure and are not strictly comparable. Fiscal years end in June.

On our reading, the three agencies differ on the starting level of the interest burden but agree on its direction. S&P Global Ratings expects the ratio to ease to 60 percent in fiscal 2027 and 53 percent in fiscal 2028, a 15 point decline over two years on our calculation. Fitch Ratings sees it at 52 percent in fiscal 2028, 11 points below its fiscal 2026 level on our calculation, and forecasts general government debt at 72 percent of GDP by the end of fiscal 2028. The 16 October action is the only upgrade among the three October reviews.

The statement also sets out what could return the outlook to stable: a conclusion that government debt and debt-affordability metrics are unlikely to improve beyond the agency’s baseline, or renewed pressure on external buffers. The agency still describes debt affordability as exceptionally weak compared with similarly rated sovereigns, and Egypt carries a CIS-4 credit impact score on environmental, social and governance factors, meaning those exposures keep the rating lower than it would otherwise be, mainly through social risks.

Why it matters: For Egypt, the upgrade turns a fiscal track record into a better credit standing. A primary surplus more than three times its fiscal 2023 level, a debt ratio 13.4 points lower in three years and net international reserves of 57 billion dollars are measurable gains that the agency now reflects in the rating. Lower interest costs as a share of revenue are the key prize: every point no longer spent on interest is revenue freed for other spending, and on our reading, the positive outlook keeps further improvement in the rating in view.

Outlook: The agency’s medium-term path of primary surpluses slightly below 5 percent of GDP runs beyond the current IMF programme, which it says concludes in December 2026. It names the upside routes: divestments under the State Ownership Policy and recoveries in Suez Canal activity and in domestic hydrocarbon production. The central bank’s next monthly net international reserves release is the reading to watch against its September figure of 57,348.2 million dollars.

Sources: Moody’s Ratings, IMF, Central Bank of Egypt, S&P Global Ratings, Fitch Ratings, The Edge.

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