Egypt’s investment landscape witnessed a crucial update in October 2025 when Standard & Poor’s (S&P) upgraded the country’s long-term credit rating to ‘B’ from 'B-'. This marks the first upgrade from the agency in years and serves as a crucial external validation of the country’s necessary economic adjustments.

On the same day, Fitch Ratings affirmed its 'B' rating, signaling a pivotal turning point for the nation's economy. This external validation of economic reforms is poised to significantly improve the investment climate, attract foreign capital, and provide a strong positive signal for the International Monetary Fund's (IMF) forthcoming reviews of Egypt's loan program.

Decoding the Upgrade

The S&P’s recent upgrade came as Egypt continued implementing its wide-ranging reform agenda, most notably, the ongoing liberalization of its exchange rate regime and sustained fiscal consolidation. These policies have been instrumental in absorbing external shocks, boosting the competitiveness of exports and tourism, and encouraging remittances.

Shawky Taha El-baz, assistant lecturer of economics at Arish University, identifies this as the single most critical factor. "The move to a truly flexible, market-determined exchange rate was the cornerstone of the entire reform package," he explains. "It unlocked the economy’s potential, corrected long-standing imbalances, and sent an unambiguous signal to the international community that Egypt is serious about fundamental change."

Complementing this, Fitch Ratings affirmed Egypt’s sovereign rating at ‘B’, highlighting the nation’s “improving growth momentum,” “stronger foreign reserves,” and narrowing current account deficit. In its latest review, Fitch reported Egypt’s gross international reserves climbed by $2.1 billion in 2025, reaching $47 billion. Meanwhile, the banking sector’s net foreign asset position improved by $13.7 billion, thanks to robust inflows from Gulf and multilateral partners and record real estate investments.

These monetary reforms were supported by strong fiscal discipline. The government successfully achieved a primary surplus of 3.5% of gross domestic product (GDP) in fiscal year (FY) 2024/2025, demonstrating a firm commitment to reining in the budget deficit.

The Impact on Egypt's Investment Climate

Fitch also projects a significant rise in foreign direct investment (FDI) to $15.5 billion and a decline in inflation to 10.4% in the coming years, painting a picture of a macroeconomic environment steadily moving from stabilization to growth.

These projections, coupled with the recent credit rating upgrade, act as an official seal of approval that encourages investments, especially foreign ones, and improves the overall investment landscape.

According to El-baz, the upgrade materially changes how foreign capital views Egyptian assets. "From an investor's perspective, this 'B' rating significantly de-risks Egyptian stocks and bonds," he notes. "For large institutional funds that have mandates restricting them from investing in lower-rated securities, this upgrade effectively opens the door to the Egyptian market. It signals a newfound stability that reduces the risk premium they demand, which should translate into higher demand and lower yields for Egyptian debt."

A better credit rating directly leads to lower borrowing costs for both the government and private corporations on international markets. As Egypt prepares to issue bonds for its development plans, it could save a significant amount of money, allowing more funds for social programs and building projects.

Moreover, the upgrade is expected to be a powerful catalyst for the government’s privatization program. S&P explicitly stated that higher-than-expected FDI inflows, particularly from the sale of state assets, could lead to another upgrade in the future. This creates a strong cycle: the improved rating makes state-owned enterprises more attractive to foreign buyers, and successful sales can lead to a further improved rating.

IMF’s Upward Forecast Strengthens Confidence

The timing of the S&P upgrade is particularly significant, coming just ahead of a crucial milestone in Egypt’s engagement with the IMF. As announced by IMF Communications Director Julie Kozack, the fund will combine and complete the fifth and sixth reviews of Egypt's $8 billion Extended Fund Facility (EFF) program this fall.

Adding to the positive momentum, the IMF's October 2025 World Economic Outlook report painted a brighter picture of Egypt’s economic direction. The IMF revised its forecast for Egypt’s real GDP growth in fiscal year 2025/2026 upward to 4.5%, from a 4.1% estimate in July. The report also projects inflation will drop significantly to 11.8% in the same period, while unemployment is set to decline to 7.3%. Underscoring this improved outlook, the IMF now ranks Egypt as the second-fastest-growing economy among oil-importing nations.

This optimistic forecast from the IMF itself, combined with the S&P upgrade, serves as powerful, independent validation that the reform program is yielding tangible results. According to Shawky Taha, this strengthens Egypt's position immensely. "The IMF's Executive Board will place considerable weight on this decision," says El-baz, referring to the S&P upgrade.

"While it may not be a 'game-changer' on its own, it serves as a crucial piece of independent evidence that the structural adjustment program is on track. It proves that the difficult measures are bearing fruit, which makes it much easier for the board to approve the disbursement of the next loan tranches," he explains.

The successful completion of these reviews is critical, as it will unlock $2.4 billion in financing, which will help strengthen its foreign currency savings and keep the economy stable, as clarified Kozack.

The Road Ahead: Challenges and Opportunities

Despite positive signals, rating agencies and the IMF continue to emphasize that sustained reform discipline is critical. The government must continue fiscal consolidation and maintain transparency to ensure long-term debt sustainability. Key vulnerabilities include high public debt—expected near 77% of GDP in FY 2026/2027—and exposure to geopolitical risks that could affect remittances or tourism, as reported by Fitch.

"Mitigating the high-interest payment burden requires a multi-faceted approach," El-baz advises. "On the revenue side, the focus must be on expanding the tax base by improving collection efficiency and formalizing the informal economy, rather than simply raising tax rates.”

He adds, “On the expenditure side, proceeds from the privatization program should be strategically used to pay down the most expensive external debts. This, combined with a continued push for non-debt-creating inflows like FDI, is the most sustainable path forward."

However, the IMF projects Egypt’s medium-term outlook as resilient. “With inflation easing, unemployment stabilizing, and external buffers rising, Egypt’s fundamentals are improving. Continued progress on structural reforms could lift potential growth further,” said Petya Koeva Brooks, Deputy Director, Research Department, during an IMF’s press briefing.

To achieve further upgrades, Egypt must prioritize speeding up privatization, continue reducing debt-to-GDP, and maintain a strong commitment to flexible currency management.

Egypt’s improved credit outlook, supported by stronger IMF forecasts and continued reform commitment, signals a turning point for the country’s investment climate. The government’s ability to build on this momentum will determine whether these international endorsements evolve into tangible, broad-based economic gains.

With the IMF poised to finalize its dual EFF program review, Egypt’s prospects for enhanced policy credibility, renewed capital inflows, and sustainable growth appear closer than ever.

By: Sarah Samir

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