The agency also affirmed the country’s short-term rating at B and assigned a stable outlook.
Fitch Ratings has likewise affirmed Egypt’s credit rating at B with a stable outlook.
In its report released on Friday, S&P said Egypt’s shift to a flexible exchange rate since March 2024 has boosted competitiveness, driven higher tourism and remittance inflows, and attracted foreign investment, including the landmark $35 billion Ras El-Hekma project with Abu Dhabi’s ADQ.
“The upgrade reflects reforms undertaken over the past 18 months, notably the liberalisation of the foreign-exchange regime, which have led to a rebound in GDP growth and an improvement in external and fiscal indicators,” S&P said.
The agency noted that Egypt achieved a primary surplus of 3.5 percent of GDP in FY2024/25, with growth rising to 4.4 percent, up from 2.4 percent the previous year. It expects growth to average 4.8 percent between FY2026 and FY2028, supported by tourism, construction, technology and a stronger private-sector role.
Fiscal and external stability
S&P projects foreign reserves will rise to $42 billion by 2028, backed by robust financial inflows and continued support from Gulf and multilateral partners, while the current-account deficit is forecast to narrow to around 4 percent of GDP.
Net external debt is expected to fall to 84 percent of current-account receipts by 2028, down from 134 percent between 2021 and 2024, a reflection, S&P said, of improved liquidity and sustained foreign direct investment (FDI) inflows.
On fiscal performance, the government’s efforts to broaden the tax base and rationalise spending under the International Monetary Fund (IMF)-supported programme are expected to sustain primary surpluses through 2028.
However, S&P cautioned that interest payments remain high, accounting for 73 percent of government revenues in FY2025, though the ratio is projected to decline to 49 percent by FY2027/28 as borrowing costs ease.
Monetary and structural reforms
S&P said inflation has dropped sharply—from 34 percent in FY2023/24 to 21 percent in FY2024/25—and is expected to average around 10 percent between FY2026 and FY2028. The Central Bank of Egypt’s (CBE) monetary easing since April 2025 should gradually lower borrowing costs and support private investment.
The agency commended Egypt’s commitment to structural reforms, including the privatisation of state-owned enterprises, tax simplification and efforts to create a level playing field for private investors. These reforms are part of its agreement with the IMF, which expanded its Extended Fund Facility (EFF) to $8 billion and added $1.3 billion under the Resilience and Sustainability Facility (RSF).
S&P said Egypt’s performance under the IMF programme has been “strong on macroeconomic stabilisation,” though it urged faster progress on structural reforms, particularly in reducing the state’s role in the economy and accelerating privatisation.
Geopolitical and policy context
The agency also noted that Egypt has remained a key regional mediator amid ongoing Gaza tensions, with its strategic importance and stability continuing to underpin financial support from Gulf partners. It cited recent investment pledges from Qatar ($7.5 billion) and Saudi Arabia’s Public Investment Fund ($5 billion) as evidence of sustained regional backing.
The stable outlook, S&P said, reflects the balance between Egypt’s improving growth and external resilience and its persistently high fiscal and debt burdens.
A negative outlook could result if reform momentum weakens or external imbalances re-emerge, while faster debt reduction, stronger fiscal performance and higher FDI inflows could prompt another upgrade.
Finance minister Ahmed Kouchouk welcomed the decision, saying the upgrade from B- to B reflects international recognition of the seriousness and positive impact of Egypt’s ongoing economic reforms and the government’s commitment to a comprehensive national reform programme.
He added that the reforms’ results, including a stronger and more resilient private sector, have gained growing attention and appreciation from investors, global markets and international institutions.
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