Ahmed Kamel – Egypt Daily News
Egypt’s Central Bank is expected to continue its restrictive monetary stance to rein in inflation, while maintaining a flexible exchange rate, according to Moody’s Investors Service. The credit rating agency highlighted that inflation has slowed significantly, reaching 13.4% year-on-year in February 2026, down from an average of 33.3% during the 2024 fiscal year, thanks to higher real interest rates and careful management of foreign reserves.
However, Moody’s warned that recent geopolitical tensions in the Middle East have created new challenges for Egypt’s economy. Since late February 2026, foreign portfolio outflows estimated at $8 billion have added pressure on the Egyptian pound and capital inflows, complicating the central bank’s efforts to stabilize markets.
The agency expects government debt service to peak this year, with interest payments projected to reach 63% of general government revenues, or 11% of GDP. These payments are anticipated to gradually decline to around 57% of revenues, or 10% of GDP, by 2028. Moody’s also forecasts the government debt-to-GDP ratio falling to approximately 76% by 2028, aided by a sustainable primary surplus, a favorable growth-to-borrowing-cost ratio, and a gradual reduction in domestic borrowing expenses.
Moody’s affirmed Egypt’s long-term foreign and local currency ratings at Caa1, maintaining a positive outlook. The agency emphasized that ongoing economic reforms and disciplined fiscal management are key to sustaining progress, improving debt sustainability, and reducing financing needs.
Despite these positive indicators, Moody’s cautioned that rising energy costs and supply disruptions are exerting pressure on Egypt’s economy. Domestic fuel prices have surged following sharp increases in global oil prices and a roughly 10% depreciation of the Egyptian pound. Meanwhile, disruptions to natural gas imports from Israel have forced a shift toward higher-cost liquefied natural gas, inflating import bills and threatening to widen the current account deficit.
The agency warned that these energy pressures could weigh on public finances by dampening domestic demand and reducing tax revenues, complicating the government’s efforts to trim subsidies while maintaining social spending. Moody’s highlighted that while macroeconomic reforms have strengthened resilience, external shocks and regional volatility remain key risks for the near term.
