Moody’s Ratings has upgraded the country’s sovereign rating from Caa1 to B3 in local and foreign currency, while maintaining a positive outlook.
Strong improvement in budget indicators: Public debt has decreased from 95.2% of GDP in June 2023 to 81.8% in June 2026. The primary budget surplus reached 4.9% of GDP in the last fiscal year, compared to 3.5% the year before. Tax revenues have increased, supported by improved collection, fiscal compliance, and reduced exemptions.
However, interest payments remain a major constraint, absorbing around 59% of public revenues in 2026. Moody’s predicts that public debt could fall below 70% of GDP by the end of the decade, with interest payments representing 50% of state revenues.
The change in exchange rate regime initiated in March 2024 is another driver of the decision. The Egyptian pound was allowed to adjust to the oil shock and Middle East conflict-related confidence crisis, without depleting reserves, which stood at $57 billion in September 2026. Foreign investors have returned to local debt, with remittances from Egyptians abroad and tourism revenues offsetting the decline in Suez Canal revenues.
The positive outlook reflects the potential for further rating improvement if the decrease in debt and financing costs continues. Moody’s conditions this on a faster easing of domestic rates, continued privatizations, and a recovery in Suez Canal revenues and hydrocarbon production. Egypt’s rating ceilings have also been raised to Ba3 in local currency and B2 in foreign currency.
