RIYADH: Moody’s Ratings upgraded Egypt’s sovereign credit rating to B3 from Caa1, citing improved public finances, stronger revenue collection and economic reforms that have helped put government debt and interest burdens on a declining path.

The agency maintained a positive outlook, reflecting the potential for further improvement in the country’s debt burden and borrowing costs. The upgrade, announced on Oct. 16, applies to the government’s long-term local- and foreign-currency issuer ratings and foreign-currency senior unsecured debt ratings.

The move follows similar decisions by other major rating agencies. S&P Global Ratings affirmed Egypt’s sovereign ratings at B/B with a stable outlook, while Fitch Ratings affirmed its B rating with a stable outlook on Oct. 8. Meanwhile, Egypt’s annual core inflation eased to 14.1 percent in September, although rising food prices continued to squeeze household budgets.

Fiscal reforms put debt on a declining path

“The upgrade to B3 is driven by Egypt’s fiscal consolidation and structural reforms, which have placed government debt and interest burdens on a declining path, albeit from elevated levels,” Moody’s said in its report.

Egypt’s Finance Ministry welcomed the upgrade, saying the government would continue pursuing fiscal reforms while supporting economic growth and job creation.

“Our priorities remain centered on adopting balanced fiscal policies that support robust growth, generate sufficient and appropriate job opportunities, and advance inclusive development efforts,” the ministry said in a statement.

The ministry said it remained committed to reducing debt-servicing costs, increasing budget revenues and keeping government debt on a downward path. It also said its policies aimed to create more room in the budget for development spending.

“This approach will create significant fiscal space in the coming years while supporting robust, employment-driven growth led primarily by the private sector,” the ministry said.

Primary surplus strengthens as revenue collection improves

Egypt’s primary budget surplus rose to 4.9 percent of gross domestic product in the fiscal year ended June 2026, from 3.5 percent in fiscal 2025 and 1.6 percent in fiscal 2023. Excluding one-off revenue, the surplus stood at 4.1 percent of GDP.

Tax revenue increased by about 1 percentage point to 13 percent of GDP in fiscal 2026, reflecting improved compliance, the removal of exemptions and expanded digital tax administration. Non-interest expenditure declined to 10.6 percent of GDP from 10.9 percent, Moody’s said.

These measures, along with economic growth and the real appreciation of the Egyptian pound, helped reduce government debt to 81.8 percent of GDP in June 2026 from 95.2 percent in June 2023.

Interest payments fell to just under 67 percent of revenue in fiscal 2026, from 73 percent a year earlier, although debt-servicing costs remain a major constraint on public finances.

Moody’s expects Egypt to maintain fiscal consolidation after its current International Monetary Fund program ends in December 2026, with primary surpluses remaining slightly below 5 percent of GDP over the medium term.

“Sustained primary surpluses and a gradual decline in financing costs should support further reductions in debt and interest burdens,” the agency said. It expects government debt to fall to just below 70 percent of GDP and interest payments to 50 percent of general government revenue by the end of the decade.