Egypt Holds Steady Amid Regional Wars as Moody's Upgrades

Egypt faces wars in Gaza to its east and Sudan to its south, while political instability grips Libya on its western border. On Friday, Moody's Ratings upgraded Egypt’s sovereign credit rating to B3, lifting it out of the “substantial risk” category. B3 remains six notches below investment grade.

On Saturday, President Abdel Fattah El Sisi made a political announcement. At a military ceremony marking the graduation of new cadets, he said: “My term in office ends in 2030 and this is a total given and will not be debated.”

The Security Picture

Many Egyptians regard El Sisi as a safe pair of hands, and the base reporting explains why. Egypt sits between Gaza and Sudan, with Libya unsettled on its western flank. The fallout from the Iran war, including Houthi attacks on Saudi Arabia, has raised Egypt’s already high energy import bills and cut Suez Canal revenue. Supporters credit the government with holding the country together through it all.

El Sisi, 71, has repeatedly warned in recent days against attempts to undermine the state, arguing Egypt couldn’t recover if it collapsed. He used the cadet ceremony to explain how he wants to prepare the next generation of leaders. The military academy will invite up to 1,000 candidates with doctorates from Egyptian or foreign universities to take a 30-month course teaching them “what is a nation and how to protect it.” The armed forces will sponsor the course. Applicants must be between 40 and 50, and officials will interview and vet them.

“Egypt is not sterile,” El Sisi said. “It’s capable of producing a leader a 100 times better than me who can come along and take over. I need the Egyptian people to support this idea.”

He dismissed as malicious rumours the claim that he was grooming a family member to succeed him. “There is no such thing,” he said. He also urged parliament to pass legislation enshrining a constitutional provision naming the armed forces as protector of the state, democracy and Egypt’s territorial integrity.

Not everyone is convinced. Critics on social media suggested the eligibility conditions might require a constitutional amendment, and some see the academy’s growing role as part of a drive to make the armed forces the country’s final authority. El Sisi has insisted that government employees, from school teachers to mosque imams and diplomats, train there before they can be hired or promoted.

The Economic Ledger

Moody’s cited fiscal consolidation, stronger revenue collection and reduced government debt and interest burdens. “Stronger revenue collection and expenditure restraint have supported [Egypt’s] progress,” its analysts said. The agency gave Egypt a positive outlook, noting reforms had performed better than expected. Fitch and S&P Global affirmed their ratings the previous week.

The shift to a flexible exchange rate in March 2024, two years ago, did much of the work. Moody’s said the unification of the foreign exchange market “eliminated chronic foreign currency shortages” and let the currency adjust without depleting official buffers, unlike in 2022. In July, Egypt unlocked about $1.8 billion in funding after clearing the latest review of its expanded programme with the International Monetary Fund.

The pressure hasn’t eased entirely. As a net energy importer, Egypt introduced fuel-saving measures after the Iran war pushed up oil and gas prices. Inflation stood at 13.9 per cent in September, according to Capmas data, and higher inflation could prompt a policy reversal at the Central Bank of Egypt, which had resisted raising interest rates. Authorities adjusted fuel and electricity prices and expanded targeted social support instead of reversing energy-price reforms.

Unsettled Questions

Critics point to heavy domestic and foreign borrowing and large infrastructure projects that may take years to pay off. They also fault the government for failing to settle a decade-old dispute with Ethiopia over the Grand Ethiopian Renaissance Dam, warning it could threaten Egypt’s vital water supply. The Blue Nile is the source of more than 80 per cent of water flowing downstream. El Sisi rejects the criticism, saying the Cairo monorail, an advanced electric train network and a new administrative capital will attract substantial foreign investment. He accuses Ethiopia of exploiting the turmoil after Mubarak’s removal in 2011 to begin construction.

The 2019 constitutional amendments, adopted in a national referendum seven years ago, keep the two-term limit but extended terms to six years. A clause treated El Sisi’s first term as beginning in 2018 rather than 2014. When his mandate ends in 2030, he will have served 16 years.

Why This Matters: Egypt is the Arab world’s most populous state and the neighbour that borders Gaza, and its stability is a strategic asset for everyone in the region, Israel included. A credit upgrade suggests the government can absorb shocks from the Iran war and the Houthi attacks that have squeezed Suez Canal revenue. But the economy still leans on IMF support and a succession plan built around the military academy. If reforms stall or inflation forces a policy reversal, a state that has anchored a volatile neighbourhood could come under strain just as the surrounding wars demand a steady hand in Cairo.