By Elias Al Helou

Egypt fulfills $25 billion debt obligations, representing 7 percent of GDP: IIF

Egypt targets 3.5 percent primary surplus, 80 percent debt-to-GDP by 2027

Egypt's IPO program to fund 50 percent of 98 percent debt-to-GDP reduction.

Egypt has repaid $25 billion of its domestic and external public debt since March, representing 7 percent of the country’s GDP, according to the Institute of International Finance (IIF).

The IIF statement was based on a virtual meeting attended by 100 speakers and participants to discuss Egypt’s economic situation. The repayment was facilitated by a development deal for the Ras El-Hekma coastal zone signed with the UAE in February. This included converting $11 billion in Emirati deposits at the Central Bank of Egypt into local currency investments, as well as repaying $2 billion in Eurobond bonds.

Investor optimism about Egypt’s prospects

International investors expressed optimism about Egypt’s economic prospects, citing the country’s strong fiscal commitment and achievement of financial targets. They noted that Egypt is aiming for a primary budget surplus of 3.5 percent of GDP in the 2024/2025 fiscal year, up from 2.5 percent estimated for 2023/2024. This would be the highest surplus since the pandemic began in 2020.

Plans to reduce public debt

Egypt plans to use 50 percent of proceeds from its government IPO program to lower its public debt, which reached 98 percent of GDP in 2022/2023. Attendees broadly agreed that Egypt will maintain primary surpluses, putting public debt on a downward path to below 80 percent of GDP by 2027.

Fiscal tightening and reforms

The IIF expects Egypt’s fiscal tightening under its IMF loan deal to further reduce public debt by achieving larger primary surpluses. Reforms have also cut off-budget spending, the main source of government expenditure. Attendees anticipate the central bank will start cutting interest rates, allowing the government to reduce its high interest burden on debt.

Declining inflation and interest rates

Egypt’s annual inflation has decreased in recent months, and is expected to fall below 15 percent by February 2025. Moreover, interest rates are predicted to be cut by 4-8 percent by June 2025 as inflation declines.

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