Fitch Ratings has raised Egypt’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘B-’ to ‘B’ with a Stable Outlook, citing improved external finances, greater exchange rate flexibility, and policy reforms.

 

The agency highlighted that the upgrade is driven by recent foreign investment inflows, particularly from the Ras El-Hekma deal, which has significantly strengthened Egypt’s foreign exchange reserves. Policy changes, including enhanced exchange rate flexibility and tighter monetary measures, have bolstered Egypt’s external financial position, increasing confidence in the sustainability of these adjustments.

 

Fitch noted that Egypt’s international reserves grew by $11.4 billion during the first nine months of 2024, reaching $44.5 billion, aided by the Ras El-Hekma investment and a rise in non-resident holdings of domestic debt. These developments help lessen Egypt’s dependency on external debt.

 

The agency also mentioned that international funding, such as the IMF’s $8 billion Extended Fund Facility and €7.4 billion in EU support, has assisted in covering Egypt’s current account deficit. Foreign Direct Investment (FDI) is expected to average $16.5 billion annually through FY25 and FY26, further boosting Egypt’s economic resilience.

 

Fitch credited the IMF’s oversight with helping to maintain a more adaptable exchange rate, marked by increased interbank FX trading volumes and stability in the parallel market rate. This exchange rate flexibility is viewed as sustainable under the current policy conditions.

 

Additionally, Fitch reported that inflation has declined from a high of 35.7 percent in February to 26.4 percent in September, with further reductions expected. High interest rates are projected to fall, which would lower the government’s debt servicing costs, an important factor for fiscal stability.