Moody's upgrades Egypt to B3 as primary surplus reaches 4.9%
Key Facts
Moody's on Friday raised Egypt's long-term credit rating to B3 from Caa1 and maintained a positive outlook, citing improved public finances, according to Investing.com. The budget's primary surplus reached 4.9% of gross domestic product in fiscal year 2026, according to the site's coverage of the agency's assessment. Moody's attributed the fiscal improvement to "stronger revenue collection and spending restraint," The National reported, citing its assessment of the Egyptian economy. Following the upgrade, Egypt remained 6 notches below investment grade, according to the newspaper. The agency thus combined an upgrade of the existing rating with a continued positive outlook for the Egyptian economy.
Detailing the revenue improvement, Egypt's Finance Ministry said in a statement following the upgrade that tax revenue reached 13% of gross domestic product. The ministry said this followed an increase in tax receipts of 1.6 percentage points of GDP over two years, without imposing additional burdens, according to its statement. On debt, total government debt fell to 81.8% of gross domestic product in June 2026, according to Investing.com's report on Moody's decision. The debt ratio had stood at 95.2% of GDP three years earlier, according to the comparison in the report. In its assessment of Egypt, the International Monetary Fund warned that "vulnerabilities remain elevated, reflecting high public debt and large gross financing needs."
On external resources, Egypt's official reserves rose to about $57 billion by September 2026, according to Investing.com's report on the upgrade. The IMF had said in its July review statement that gross international reserves at the end of June were equivalent to 119% of its reserve adequacy metric. In markets, the fund said in its presentation published in September that Egypt's sovereign risk premium had fallen by August to its lowest level since 2014, ahead of Moody's decision. On domestic prices, inflation stood at 13.9% in September, according to The National's coverage of the Egyptian economy. The newspaper attributed persistently high inflation to pressures from rising energy costs.
Against the backdrop of Egypt's financing relationship with the IMF, the July reviews allowed Egypt to draw a new amount under the Resilience and Sustainability Facility, according to the fund's statement on the review results. The statement put the amount available under the facility at 200 million Special Drawing Rights. That was equivalent to about $272 million, according to the fund's approximate valuation of the amount approved for withdrawal. Total drawings and disbursements under the fund's two arrangements with Egypt reached 5.4 billion Special Drawing Rights as of the July reviews. The fund estimated the dollar equivalent of that total at about $7.3 billion in its presentation of financing provided under the two arrangements.
On reforms, the IMF stressed in its review report on the Egyptian economy the continued need to accelerate measures to reduce the state's footprint and support the private sector. The fund emphasized the priority of accelerating divestments from state-owned companies, according to its press briefing in early October on the current program with Egypt. It listed implementation of the State Ownership Policy among the program's priorities, alongside steps to divest government-owned companies. It also called for a level playing field between private-sector and state-owned companies as part of the measures needed to reduce the state's economic role. The priorities outlined by the fund also included strengthening the governance of state-owned companies, according to the same briefing.
These priorities enter the remaining phase of Egypt's Extended Fund Facility arrangement, which the fund said would expire on 15 December 2026. The fund announced the date at its press briefing in early October, before Moody's decision to upgrade Egypt's credit rating. It said at the briefing that "the Extended Fund Facility arrangement is scheduled to expire on 15 December 2026." The date applies to the current arrangement under the Extended Fund Facility, as specified in the fund's briefing on Egypt. The call to accelerate reforms, reduce the state's footprint and support the private sector remains part of the fund's assessment of the Egyptian program.