S&P Forecasts Egyptian Pound Depreciation and Rising Current Account Deficit through 2026
- P Global Ratings has affirmed Egypt's sovereign credit rating at B/B with a stable outlook, following the government's commitment to maintaining a flexible exchange rate system.
- The rating agency's assessment coincides with a significant increase in international reserves.
- Despite the stable credit rating, forecasts for the Egyptian pound (EGP) indicate a trend of gradual depreciation against the U.S.
S&. P Global Ratings has affirmed Egypt’s sovereign credit rating at B/B
with a stable outlook, following the government’s commitment to maintaining a flexible exchange rate system. This affirmation comes as the Egyptian government continues to implement fiscal reforms and an expanded program to stabilize the national economy.
The rating agency’s assessment coincides with a significant increase in international reserves. International reserves rose to $52.8 billion in March 2026, a development that has helped boost foreign currency inflows and strengthened the country’s financial positioning.
Currency Projections and Exchange Rate Volatility
Despite the stable credit rating, forecasts for the Egyptian pound (EGP) indicate a trend of gradual depreciation against the U.S. Dollar. Various projections suggest the currency will continue to face downward pressure over the coming years.
According to data from Wallet Investor and LongForecast, the USD/EGP rate is projected to move from a range of 48.1 to 48.3 EGP in early 2026 to between 56 and 59 EGP by 2029. Some bullish scenarios suggest the rate could reach as high as 104 EGP by 2030.
Other reports indicate that S&P Global expects the dollar to rise to between 55 and 60 Egyptian pounds during the current and following year. This outlook aligns with the government’s strategy of sustaining a flexible exchange rate, which has already seen the pound devalued.
Fiscal Challenges and Current Account Deficits
S&P Global has raised its projections for Egypt’s current account deficit through the 2025-2026 period. The agency’s analysis suggests that the nation’s funding sources may struggle to cover high external financing requirements, which are estimated at approximately $37 billion cumulatively for the current and next fiscal year.
There is a noted discrepancy between S&P Global’s projections and those of the International Monetary Fund (IMF) regarding the central bank’s gross reserves. While the IMF sees reserves reaching a higher level, S&P projected that gross reserves would average about $32 billion during the period leading up to fiscal year 2026.
The agency warned that a lack of progress in implementing reforms could lead to delays or failures in receiving agreed-upon funds from backers, including Gulf allies. Such a scenario would have direct implications for imports, inflation, interest rates, and the government’s debt stock and interest payments.
Investor Activity and Debt Markets
The appetite for Egyptian government debt among non-resident investors has seen a decline. Holdings of Egyptian government debt instruments by non-resident investors fell to $27.1 billion by the end of March 2026.
This trend follows a period of volatility in the bond market. Previously, Egyptian dollar bonds experienced a slump after S&P Global took a more pessimistic view of the nation’s finances compared to the IMF. During that period, dollar bonds maturing in 2027 dropped 7 cents, while notes maturing in 2032 fell 3 cents, leading to yields of 20.2% and 17.6% respectively.
At one point, Egyptian debt across various maturities accounted for six of the ten worst-performing bonds in emerging markets, reflecting the market’s sensitivity to currency depreciation forecasts and fiscal outlooks.
Economic Outlook and Risks
The current economic trajectory for Egypt is characterized by a balance between necessary fiscal reforms and the risks associated with emerging market currencies. While the increase in reserves to $52.8 billion provides a buffer, the long-term projection of the Egyptian pound’s value remains a primary concern for investors.
- The government is committed to a flexible exchange rate to attract inflows.
- External financing requirements remain high at an estimated $37 billion.
- Sovereign credit rating remains at B/B with a stable outlook.
- Non-resident investment in government debt has contracted to $27.1 billion.
Financial analysts note that while the EGP may offer opportunities for long-term investors due to its gradual depreciation, the risks inherent in emerging market currencies mean that past performance is not a guarantee of future results.