RIYADH: S&P Global Ratings affirmed Egypt’s long- and short-term sovereign credit ratings at “B/B” with a stable outlook, citing policy measures that helped contain the economic fallout from regional conflict and a recovery in foreign-exchange buffers.  Foreign portfolio outflows reached $9.5 billion in the months after the conflict escalated on Feb. 28, while the Egyptian pound depreciated by as much as 15 percent against the US dollar, the agency said.  Exchange-rate flexibility, energy price adjustments and targeted social support helped stabilise financial conditions and restore orderly trading in the foreign-exchange market, according to S&P.  “Egypt’s external buffers have strengthened despite a temporary post-shock weakening,” S&P said.  Foreign holdings of Egyptian local-currency government securities recovered to $34.5 billion in September from $22.2 billion in April, although they remained below February’s peak of $39.1 billion.  External buffers recover  Egypt’s international reserve assets reached a record $54.5 billion in September, according to S&P. Separately, the Central Bank of Egypt reported net international reserves of $57.35 billion at the end of the month. Record remittance inflows, tourism receipts and recovering Suez Canal revenue helped offset pressure from higher energy import costs, the agency said.  S&P warned that intermittent gas-supply disruptions and renewed pressure on shipping through the Bab El-Mandeb Strait remained risks to Egypt’s external position.   The country’s exposure to energy imports leaves its external accounts vulnerable to higher global fuel prices and supply disruptions. Prolonged regional instability could also weigh on trade and foreign-currency inflows.  Egypt has been a net importer of crude oil since 2008 and natural gas since 2023, with fuel and natural gas accounting for approximately 22 percent and 8 percent of total goods imports, respectively.  Egypt’s economy expanded 5.1 percent in the fiscal year ended June 2026, its fastest pace in three years, according to the agency. S&P expects growth to moderate to 4.5 percent in fiscal 2026/27 as regional disruption continues to affect energy supplies and trade. The agency forecasts a current-account deficit of 5 percent of gross domestic product in fiscal 2026/27, compared with 5.1 percent in the previous fiscal year.  Debt costs remain a constraint   Egypt recorded a primary budget surplus of 4.9 percent of GDP in fiscal 2025/26, exceeding its International Monetary Fund target, while the overall budget deficit stood at 5.8 percent.   High debt-servicing costs remain a key constraint on the sovereign rating. S&P estimated that interest payments absorbed 67 percent of government revenue in fiscal 2025/26. It expects the ratio to decline to 60 percent in fiscal 2026/27 and 53 percent the following year.  The agency described Egypt’s banking system as “a stable and reliable source of local currency funding for the government,” although gross public financing requirements remain above 30 percent of GDP.  Inflation is forecast to average 12.9 percent in fiscal 2026/27 before gradually easing to 9 percent by fiscal 2028/29.  The Central Bank held its overnight deposit and lending rates at 19 percent and 20 percent, respectively, in September.  S&P said it could upgrade Egypt’s rating if government and external debt fall faster than expected, potentially driven by stronger foreign direct investment and state-asset sales. However, reduced exchange-rate flexibility, renewed foreign-currency shortages or rising interest costs could trigger a downgrade.  The affirmation came a day after Fitch Ratings maintained Egypt’s long-term rating at “B” with a stable outlook, also citing resilient external buffers and continued support from bilateral and multilateral partners.