Fitch upgrades Egypt's credit rating to B with stable outlook

In related news, Standard & Poor's Global Ratings has maintained Egypt's rating at 'B-/B' with a positive outlook over the past two weeks.

Fitch attributed this upgrade to an increase in international reserves, which rose from $11.4 billion in March to $44.5 billion, and a recovery in the net foreign asset position, which has nearly balanced out from a deficit of $17.6 billion in January.

This improvement was driven by $24 billion in new foreign currency from the Ras El-Hekma deal, which also strengthened Egypt's support from Gulf Cooperation Council (GCC) partners. Additionally, there has been an estimated increase of nearly $17 billion in non-resident holdings of domestic debt since February.

The remaining $11 billion from the Ras El-Hekma investment involved converting existing UAE foreign currency deposits at the Central Bank of Egypt (CBE), thereby reducing external debt.

In February, Egypt signed its largest FDI deal with the UAE, valued at $35 billion, to develop the coastal area of Ras El-Hekma. This project is expected to draw in $150 billion in investments.

Egypt's Investment Outlook
 

Fitch anticipates that foreign direct investment (FDI) in Egypt will average $16.5 billion over the next two fiscal years, supported by new investments from Saudi Arabia and the Ras El-Hekma project. These inflows should help cover the current account deficit, which widened by 4.2 percentage points in fiscal year (FY) 2024 to reach 5.4 percent of GDP.

Fitch projects a reduction in this deficit to 5.2 percent in FY2025 and 4 percent in FY2026, constrained by a partial recovery in gas production and lower Suez Canal revenues.

Fitch projected that revenue from the Suez Canal will gradually recover to around half of the FY2023 level in FY2026, mitigating risks. 

Egypt is experiencing a 70 percent decline in the revenue it once earned from the Suez Canal.