S&P Positive On Egypt's Rating After $35B Ras Al Hikma Investment, Expanded $8B IMF Deal

Rating agency S&P is encouraged by the substantial financial inflows that Egypt has received in the last two weeks, particularly from the historic $35 billion Ras Al Hikma deal with the UAE and the expanded $8 billion deal with the International Monetary Fund (IMF).

S&P outlook

The Egyptian authorities are making "positive" statements regarding reforms, Reuters quoted Trevor Cullinan, director of sovereign ratings at S&P Global Ratings in Dubai, as saying. "Taken on face value, they seem committed to this whole reform strategy, but as we know, events can derail a government, and we will wait and see," he added.

Cullinan said while the rating agency was anticipating an exchange rate adjustment and progress on the IMF deal, "What we were not expecting was the whole Ras al-Hikma inflow from ADQ, which is obviously a really big number."

Egypt last week received the initial tranche from a historic $35 billion deal with the UAE for the Ras Al-Hikma project and signed an $8 billion loan with the IMF on Wednesday.

Talks over a positive outlook come amid the Egyptian government's recent efforts to battle the country's foreign exchange crisis, historically high inflation and constrained private sector activity. Egypt's central bank raised its key policy rates by 6%, or 600 basis points, on Wednesday in an urgent attempt to address mounting inflationary pressures.

S&P could change the rating without a prior outlook change, Cullinan said, but was unclear on whether this would be the case for Egypt. "If there are significant events in between the scheduled reviews that take place twice a year, then we have the option to call a committee potentially."

S&P had downgraded Egypt's credit rating to B- in October amid mounting funding pressures weighing on the country's economic growth. In an October report, the agency noted that the future outlook depends on the Egyptian government's efforts to bridge the country's large external financing gap.

Other upgrades

Moody's raised its outlook on Egypt from negative to positive on Thursday, attributing it to the "significant official and bilateral support" the country received over the last two weeks.

The foreign direct investment (FDI) contribution from the UAE bolsters the Egyptian economy's foreign exchange reserves to cover Moody's estimated external financing gap until June 2026.

Additionally, Fitch improved Egypt's external liquidity outlook last week after the country received the first tranche of funding from the Ras Al-Hikma deal. The $35 billion deal will relieve Egypt's external liquidity strains while facilitating an adjustment of its exchange rate.