Egypt Moves to Reduce Debt: New Strategy Looms for 2025 In light of the economic challenges facing Egypt as a result of the increase in debt over the past ten years, the government is moving towards formulating a new strategy for managing public debt, aiming to reduce the financial burden and enhance economic stability.
Decrease in external and domestic debt
Egypt’s external debt has doubled over the past decade, rising from $46 billion in 2014 to a peak of $168 billion in December 2023. However, the government was able to reduce it to $153 billion by the end of June 2024, a decrease of $15 billion.
At the level of domestic debt, it decreased by 2.7% to reach 8.7 trillion pounds, compared to 8.9 trillion pounds in March of the same year.
Egypt’s Finance Minister Ahmed Kouchouk announced in previous statements that the government is working on formulating a comprehensive debt management strategy that will be revealed during the first quarter of 2025.
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%, according to local media.
Measures to improve debt management
The new plan includes a set of measures aimed at reducing the financial burden on the general budget, most notably restructuring the borrowing policy, as it aims to direct the debt towards a downward path, while extending the average life of the debt to reduce pressure on public finances.
In addition to diversifying financing tools, including issuing local sukuk and variable-yield bonds to benefit from low interest rates, as well as rationalizing external borrowing, limiting borrowing to soft financing with low interest rates from international institutions.
The new strategy is based on directing part of the proceeds from the sale of government assets to pay off debts. Egyptian law stipulates that 50% of the proceeds from these sales be allocated to the Ministry of Finance, which contributes to effectively reducing public debt.
The government seeks to transform debt into productive investments through innovative models such as the “Ras Al-Hikma” deal, which contributed to reducing external debt and replacing it with investment projects.
Strategy Prospects and Future Impact
With a significant decline in external and domestic debt during the first half of 2024, the data confirms that the new policies are starting to bear fruit.
The announcement of the new strategy in early 2025 is expected to mark a turning point in debt management, enhancing the government’s ability to achieve greater financial stability and drive sustainable development.
