Ahmed Kamel – Egypt Daily News
S&P Global Ratings has affirmed Egypt’s sovereign credit rating at “B/B” with a stable outlook, citing a balance between medium-term growth prospects and ongoing reform momentum against renewed external risks linked to regional conflict.
The agency said the current environment reflects a combination of economic stabilization efforts and persistent vulnerabilities to global shocks, particularly those stemming from energy and food markets.
External pressures linked to regional tensions
S&P noted that the ongoing Iran-related conflict is creating renewed pressure on Egypt’s external position, which remains sensitive to volatility in global commodity markets.
The agency warned that higher global oil prices could worsen inflation dynamics in Egypt, potentially keeping domestic interest rates elevated for an extended period.
It highlighted Egypt’s reliance on imported energy since 2023, with fuel and gas representing a significant share of total goods imports, making the economy particularly exposed to fluctuations in global energy markets.
S&P also pointed to disruptions in gas supply from Israel’s Leviathan field, which accounts for a major portion of Egypt’s gas imports, prompting authorities to adopt energy rationing measures. The country has increasingly relied on more expensive liquefied natural gas (LNG) imports, raising import costs and widening pressure on the current account.
Trade, tourism, and remittances under risk
The rating agency cautioned that prolonged regional instability could weigh on several key sources of foreign currency, including:
- Remittances from Egyptians abroad, particularly from Gulf countries
- Tourism revenues
- Suez Canal traffic, especially if Red Sea shipping routes are disrupted
S&P said a potential escalation affecting maritime routes could significantly impact logistics and trade flows.
Growth forecast revised downward
S&P lowered its expectations for Egypt’s economic growth to:
- 4.7% in FY2025/2026 (down from 4.8%)
- 4.3% in FY2026/2027 (down from 4.7%)
The agency attributed the downgrade to shipping disruptions linked to regional tensions, which may increase import costs and weigh on consumption and investment amid higher uncertainty and inflation.
Stronger external position compared to past crises
Despite the risks, S&P said Egypt is entering the current period with a stronger external position than in previous crises, supported by recent economic reforms.
These reforms include currency liberalization, which has helped attract significant foreign direct investment, particularly from Gulf countries, and improved access to multilateral financial support.
Foreign reserves rose to $52.8 billion in March 2026, up from about $41 billion during the 2022 Russia–Ukraine shock period.
The agency also noted Egypt’s continued commitment to a flexible exchange rate regime, pointing to a roughly 13% depreciation of the Egyptian pound since late February without direct intervention.
Risks to the outlook
S&P said the rating could be downgraded if:
- Reform commitments weaken
- Fiscal or external imbalances worsen
Conversely, an upgrade could occur if:
- Government and external debt indicators improve faster than expected
- Foreign investment inflows strengthen significantly
Bottom line
S&P’s decision reflects a cautious but stable view of Egypt’s economy, where reform progress is offset by exposure to external shocks, particularly energy markets and regional geopolitical instability.
