Egypt Daily News – Egypt faces economic challenges as a result of the worsening debt volume over the past ten years, as external debt doubled from $46 billion in 2014 to its peak of $168 billion in December 2023.
Despite the high volume of external debt, the government succeeded in reducing it to $153 billion by the end of June 2024, a decrease of $15 billion.
How big is the domestic debt? The domestic debt witnessed a slight decline of 2.7%, reaching 8.7 trillion pounds in June 2024, compared to 8.9 trillion pounds in March of the same year.
In light of this reality, the Egyptian government is working on formulating a new debt reduction strategy, which is expected to be officially announced during the first quarter of 2025, according to statements by Finance Minister Ahmed Kouchouk.
The strategy aims to reduce the debt-to-GDP ratio to 85% during the current fiscal year, compared to the current level of more than 96%, which in itself is an achievement.
Challenges and targets
The accumulation of debt constitutes a large burden on the Egyptian budget, as debt and its interest consume more than 80% of total government expenditures. The government seeks to reduce this percentage to about 30% in the medium term, by implementing several key measures.
These measures include managing debt effectively by restructuring borrowing policy to steer debt toward a downward path, and lengthening the average life of debt to ease pressure on public finances.
It also includes diversifying financing tools by issuing new debt instruments, such as local bonds and variable-yield bonds to take advantage of low interest rates, in addition to limiting external borrowing to concessional financing with low interest rates from international institutions.
The goals of the new strategy include reducing interest costs, by directing part of the proceeds from the sale of government assets to pay off debts. The law stipulates that 50% of the proceeds from the sale of assets be allocated to the Ministry of Finance, which enhances debt reduction efforts.
Among the goals is to convert debts into investments, by taking advantage of innovative models such as the “Ras El Hekma” deal, which contributed to reducing external debt and replacing it with productive investments.
A shift in borrowing policy
These measures signal a fundamental change in the government’s borrowing policy, aiming to reduce reliance on costly external loans and focus on more sustainable resources. The data also shows that these policies are beginning to bear fruit, with external and domestic debt declining in the first half of 2024.
Announcing the new strategy in early 2025 will be a turning point in Egyptian public debt management. If these plans are implemented effectively, Egypt can achieve greater financial stability, relieving pressure on the public budget and enhancing its ability to achieve sustainable development goals.
