S&P Affirms Egypt at B as International Reserve Assets Reach a Record 54.5 Billion Dollars
S&P Global Ratings affirmed Egypt’s ‘B/B’ long- and short-term foreign and local currency sovereign credit ratings on 9 October and kept the outlook stable. The agency said exchange rate flexibility, energy price adjustments and targeted social support had helped contain the immediate pressures from the Middle East conflict. It said record remittances, tourism receipts and recovering Suez Canal revenue had helped offset the effect of higher global energy prices on the trade balance, and it put international reserve assets at a record 54.5 billion dollars in September. The decision follows Fitch Ratings’ affirmation of Egypt at ‘B’ with a stable outlook on 8 October, so both agencies have now reaffirmed their ratings in the same week. It matches the agency’s previous review, an identical affirmation on 10 April 2026.
Reserves and Inflows Behind the Affirmation
The Central Bank of Egypt reported net international reserves of 57.348 billion dollars at the end of September (provisional), the latest official reading, a different measure from the rating report’s international reserve assets. The rating report traces the return of portfolio inflows after the outflows of early 2026. Portfolio outflows reached 9.5 billion dollars in the months after the conflict began on 28 February, and the pound fell by up to 15 percent against the dollar. Foreign holdings of local-currency government securities then rose back to 34.5 billion dollars in September, from 22.2 billion in April, a recovery of 12.3 billion dollars, or 55.4 percent, leaving them 4.6 billion dollars below the February peak of 39.1 billion, on our calculation.
On our calculation, net international reserves cover those foreign holdings 1.66 times, a margin of 22.8 billion dollars over the entire foreign stock. The banking system’s net foreign assets reached a six-year high of 31.2 billion dollars over the same period, the agency said.
Suez Canal revenue is recovering too. It reached 3.4 billion dollars in the first nine months of fiscal 2026, against 2.8 billion a year earlier, a rise of 21.4 percent on our calculation.
Egypt’s External Buffers and Inflows, Latest Readings
| Indicator | Value | Period |
|---|---|---|
| Net international reserves | $57.348bn | End-September 2026 |
| International reserve assets | $54.5bn | September 2026 |
| Banks’ net foreign assets | $31.2bn | September 2026 |
| Foreign holdings of local debt | $34.5bn | September 2026 |
| Suez Canal revenue | $3.4bn | Jul 2025 to Mar 2026 |
Net international reserves are the central bank’s provisional figure of 7 October 2026 (57,348.2 million dollars). The other rows are as stated in the 9 October rating report; its international reserve assets are a different measure from the central bank’s net international reserves.
A 4.9 Percent Primary Surplus Anchors the Fiscal Case
Egypt posted a primary budget surplus of 4.9 percent of GDP in fiscal 2026, the year to June, and the overall budget deficit came in at 5.8 percent of GDP, the Finance Ministry said on 8 October. The rating report gives the same two figures and says the authorities beat their IMF targets. Tax revenue rose 27 percent, according to the ministry. Energy subsidies came to 196 billion Egyptian pounds, or 0.9 percent of GDP, according to the agency.
The two fiscal figures together give the size of the interest bill. A 5.8 percent overall deficit alongside a 4.9 percent primary surplus means interest cost 10.7 percent of GDP in fiscal 2026, on our calculation. The agency puts interest payments at 67 percent of budget sector revenue in fiscal 2026. It also notes that domestic debt carries a weighted average maturity of 1.1 years and that gross financing needs continue to exceed 30 percent of GDP. It expects the general government interest-to-revenue ratio to ease to 60 percent in fiscal 2027 and 53 percent in fiscal 2028, from 68 percent in fiscal 2026.
The agency named the conditions for a downgrade plainly. It could lower the ratings if the government’s commitment to structural reform, including exchange rate flexibility, wanes and economic imbalances such as foreign currency shortages widen. Already elevated interest costs putting further pressure on government finances, or geopolitical tensions impairing Egypt’s access to external markets, could also prompt a negative rating action. On the upside, it could raise the ratings if net government and external debt positions improve much faster than it expects, perhaps through accelerated deleveraging or higher foreign direct investment supported by planned state asset sales.
Inflation Sets the Pace for Rates
Annual headline inflation was 14.5 percent in August and core inflation 14.9 percent, according to the central bank’s latest readings. Monthly headline inflation was minus 0.4 percent in June, 0.0 percent in July and 0.1 percent in August. On 24 September the Monetary Policy Committee left the overnight deposit rate at 19.00 percent and the lending rate at 20.00 percent. It lowered its inflation forecast from the August meeting and expects inflation to converge on its 7 percent target, plus or minus 2 points, in the second half of 2027.
On our calculation, the deposit rate sits 4.5 percentage points above August inflation, and the rating report says high real interest rates drew foreign buyers back into local debt. It notes a cumulative 825 basis points of rate cuts between April 2025 and February 2026. August’s reading is 7.5 points above the target midpoint, on our calculation. The agency expects inflation to average 12.9 percent in fiscal 2027 and 12 percent across fiscal 2027 and 2028, before easing to 9 percent by fiscal 2029.
Two Agencies, One Rating
The two reviews agree on the rating and largely on the numbers. Both put the fiscal 2026 current account deficit at 5.1 percent of GDP, and both expect growth to moderate in fiscal 2027 from the 5.1 percent recorded in fiscal 2026. That was the fastest growth in three years, according to the 9 October report.
Egypt Holds B With a Stable Outlook at Both Agencies
| Measure | S&P, 9 Oct | Fitch, 8 Oct |
|---|---|---|
| Rating and outlook | B, Stable | B, Stable |
| Growth forecast, FY2027 | 4.5% | 4.7% |
| Average inflation, FY2027 | 12.9% | 12.3% |
| Current account deficit, FY2026 | 5.1% of GDP | 5.1% of GDP |
| Government deficit, FY2026 | 5.8% of GDP | 5.3% of GDP |
| Interest to revenue, FY2028 | 53% | 52% |
Forecasts are each agency’s own. Deficits are on a general government basis. Fiscal years end in June.
The IMF completed its seventh review in July 2026, releasing 1.7 billion dollars, and the eighth and final tranche of 1.7 billion dollars is expected in December 2026. The 9 October report judges a successor programme unlikely. It also cites the European Union’s 7.4 billion euro package for 2024 to 2028, and says it expects Gulf Cooperation Council states to keep up their financial support. In its words, the banking system is “a stable and reliable source of local currency funding for the government”.
Why it matters: Two rating agencies reaffirmed Egypt’s rating in one week. The 9 October report points to figures that can be tracked at the next review: a 4.9 percent primary surplus, international reserve assets at a record 54.5 billion dollars, a 12.3 billion dollar return of foreign money into local debt since April, on our calculation, and growth of 5.1 percent, the fastest in three years.
Outlook: The report sets out the route to an upgrade: net government and external debt improving much faster than it expects, perhaps through higher foreign direct investment and planned state asset sales. The next checkpoints are September inflation, the central bank’s October net international reserves figure and the IMF’s final 1.7 billion dollar tranche, expected in December. Meanwhile the agency’s forecast fall in the interest-to-revenue ratio to 53 percent by fiscal 2028, from 68 percent in fiscal 2026, would free a larger share of revenue for spending other than interest.
Sources: S&P Global Ratings, Central Bank of Egypt, Ministry of Finance, Fitch Ratings, The Edge.
