Caught up in a generally virtuous circle — this is how some observers see developments on Egypt’s economic front these days.
Even with the ceasefire in Gaza, a political breakthrough dominating the headlines, the economic implications of the war cannot be ignored. However, the resulting calm in geopolitical tensions should translate into reduced political risk for investors in the region, two factors that should boost Suez Canal receipts, which fell by 70 per cent last year, and spur an uptick in foreign direct investment (FDI).
In other news, an unnamed official told the online outlet Enterprise News recently that the government is considering revisiting its decision to raise fuel prices in October. The move stems from expectations that global oil prices will ease, petroleum import costs will decline, and the pound will strengthen on the back of the Gaza peace agreement, reducing the need to phase out subsidies to reach cost recovery.
The reports come alongside praise from the world’s major ratings agencies.
S&P has upgraded Egypt’s long‑term sovereign credit rating to B from B‑, the first upgrade in seven years. The ratings agency said the upgrade reflects “the reforms undertaken over the past 18 months by the authorities, including the liberalisation of the foreign exchange [FX] regime, which have led to GDP growth rebounding sharply in fiscal year 2025.”
It also noted that external financing pressures have eased, with Central Bank of Egypt (CBE) usable reserves forecast to rise to $42 billion by 2028.
S&P said that net external debt is expected to fall to an average of 84 per cent of current account receipts through 2028, down from an average of 134 per cent in the four‑year period ending in the 2023-24 fiscal year.
Fitch Ratings was also upbeat, reaffirming its B rating and stable outlook for Egypt. “The move is supported by Egypt’s relatively large economy, fairly high potential GDP growth, and strong support from bilateral and multilateral partners,” a Fitch note stated.
Another positive development is a further decline in inflation in September, the fourth consecutive monthly drop, to 10.9 per cent thanks to a 1.4 per cent fall in food and beverage prices, the largest component of the consumption basket used to calculate headline inflation.
The decline was also supported by a favourable base effect and a 1.5 per cent appreciation of the pound against the dollar during the month, according to an HC Securities commentary.
Such improving indicators should support the Egyptian delegation travelling to Washington next week to discuss the country’s deal with the International Monetary Fund (IMF).
While Egypt has made progress on adopting a flexible exchange-rate regime, lowering inflation, and keeping government spending under control, it has fallen short on privatisation. The IMF postponed the fifth review of its $8 billion loan scheduled for May, delaying a $1.2 billion disbursement by up to six months due to the slow pace of privatisation.
The fifth and sixth reviews were merged and are now scheduled to take place this month.
The government has repeatedly announced plans to sell stakes in five companies this year, including entities owned by the military, but little progress has been made so far.
“If the IMF feels that its concerns around privatisation are not being addressed, it could postpone both reviews again, delaying the disbursement of an overall $2.4 billion [the value of the fourth and fifth tranches of the loan] to Egypt,” said a Capital Economics note.
“There’s a clear risk that the deal is abandoned altogether,” the note added, while stressing that such an outcome would be less damaging than before because gross external financing requirements are shrinking as the current account deficit narrows and reserves reached nearly $50 billion.
The UK‑based research house also pointed to Qatar’s announcement that it would proceed with a $7.5 billion investment deal, noting that “capital can still flow from the Gulf as an IMF loan alternative.”
The generally positive sentiment is reflected in, and to some extent driven by, a strengthening pound. The pound was trading at LE47.9 to the dollar on Monday, almost six per cent higher than at the start of the year.
Rather than betting on a decline, the US investment bank Morgan Stanley said last week that it is now investing in short‑term Egyptian bonds without hedging, showing confidence that the pound will continue to strengthen.
“The market will watch to see if other international financial institutions follow Morgan Stanley’s lead. A growing bullish consensus could attract more foreign portfolio investment into Egypt’s local debt market, providing further support for the pound and signaling increased confidence in the country’s macroeconomic stability,” said a note by Rumble, an online research and investment platform.
Morgan Stanley’s bullish call is supported by diverse and resilient investment inflows, not a single source, according to Rumble analyst Ahmed Elhefnawi.
“This is happening alongside a boom in tourism, as recent devaluations have made Egypt a very cheap destination. Another factor contributing to this is the unexpected influx of expats fleeing regional geopolitical tensions, which has created a new and steady stream of US dollars into the economy. Together, these traditional and new sources provide a much stronger foundation for the pound than we’ve seen in years,” Elhefnawi said.
However, concerns about the pressure of high debt repayments persist, according to both S&P and Fitch. Egypt recorded a net repayment of $3.5 billion on medium‑ and long‑term loans in 2024-25, compared with a net repayment of $2.4 billion a year earlier.
The sharp tightening of CBE policy rates in March 2024 to 27.25 per cent, alongside exchange-rate liberalisation, led to a sharp rise in domestic treasury bill and bond auction rates and further increased already elevated government debt‑servicing costs.
Egypt faces about $55 billion in external obligations through the end of 2026, including $33.2 billion due in 2025, according to a December note by Al-Ahly Pharos. Covering these liabilities will depend on large FDI inflows or new borrowing, making major foreign investment deals and asset sales crucial for near‑term stability.
The Finance Ministry is adopting a plan to extend maturities and reduce overall debt by diversifying debt instruments. The plan also targets keeping external debt for budget entities at $79.1 billion, unchanged since September 2024.
* A version of this article appears in print in the 16 October, 2025 edition of Al-Ahram Weekly
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