Arab Finance: S&P Global Ratings has affirmed Egypt’s sovereign credit ratings at ‘B/B’ for both foreign- and local-currency obligations, with a stable outlook, according to its latest report.

The agency said Egypt’s proactive policy measures helped contain immediate economic pressures stemming from the Middle East conflict.

Foreign portfolio outflows reached $9.5 billion in the months following the conflict’s outbreak on February 28, 2026, while the Egyptian pound depreciated by as much as 15% against the US dollar.

However, a swift policy response helped stabilize market conditions, reverse much of the currency volatility, and support the orderly functioning of the foreign exchange market, S&P elaborated.

The government’s economic reforms included maintaining exchange rate flexibility, implementing nationwide energy conservation measures, and adjusting fuel and electricity tariffs alongside targeted social support.

This policy discipline also supported fiscal performance, with the authorities exceeding their IMF targets and delivering a primary surplus of 4.9% of gross domestic product (GDP) in the fiscal year (FY) 2025/2026.

S&P’s base-case scenario assumes that disruptions across the Middle East will persist in 2027, keeping regional oil and gas flows below pre-conflict levels through the year’s end.

Egypt has been a structural net energy importer since 2023, with fuel and natural gas accounting for nearly 22% and 8% of total goods imports, respectively.

Although alternative liquefied natural gas (LNG) supplies remain available at higher costs, intermittent disruptions to gas supplies from Israel’s offshore Leviathan field remain a key risk, as demonstrated by interruptions in March 2026.

The agency also warned that renewed regional escalation disrupting shipping through the Bab el-Mandeb Strait could undermine the recovery in Suez Canal transit volumes and trigger further portfolio outflows.

Annual headline inflation accelerated to 15.2% in March 2026 before easing to 14.5% in August, following a 43-month low of 11.7% in September 2025.

In this regard, the Central Bank of Egypt (CBE) kept its benchmark overnight deposit and lending rates unchanged at 19% and 20%, respectively, in its September meeting.

“We expect inflation to average 12.9% in FY2026/2027, reflecting still-elevated international energy prices, with risks of a policy reversal if the conflict persists for several more months,” the report highlighted.

It added: “We expect domestic yields to decline more gradually than anticipated, with the government's interest-to-revenue ratio remaining elevated at 60% in FY2026/2027 and 53% in FY2027/2028, but down from 68% in FY2025/2026.”