Egypt’s external debt has decreased by 8.43 percent, hitting $153.86 billion at the end of May 2024 compared to $168.03 billion at the end of December 2023, according to an official source at the Central Bank of Egypt (CBE).
Foreign currency inflows surge
The source stated that foreign currency inflows into the local market have jumped by about 200 percent, including more than a 100 percent rise in the remittances of Egyptians abroad compared to their level before the unification of the exchange rate.
Exchange rate devaluation and IMF commitment
On 6 March, the CBE devaluated the Egyptian pound against the U.S. dollar, allowing the local currency to lose over 60 percent of its value against the greenback, as part of Egypt’s commitment to the International Monetary Fund (IMF) to adopt a flexible foreign exchange regime under the $8 billion loan program.
Record high foreign reserves
The source also highlighted the latest progress in the CBE’s foreign reserves, which recorded an all-time high of $46.83 billion in June 2024, a $13.26 billion rise from August 2022 and representing 253 percent growth. The current reserves cover approximately 7.9 months of Egypt’s commodity imports, surpassing the internationally known standards for safe levels.
Agreements and financial packages
This is mainly attributed to the agreements signed in 2024, including the largest foreign direct investment (FDI) deal in Egypt’s history in Ras El-Hekma, which pumped $35 billion into the economy. Additionally, the IMF expanded its loan deal with Egypt from $3 to $8 billion through 2026, and a $57 billion financial package was committed to Egypt via international financial institutions and development partners.
Read more: CBE raises interest rates by 200 basis points: Is a currency devaluation on the horizon?
EU investment commitment
Furthermore, the European Union (EU) committed EUR7.4 billion to Egypt in the Egypt-EU Investment Conference, with EUR1 billion provided immediately.
Eradication of foreign assets deficit
The source explained that the upward trajectory of the foreign currency inflows eradicated the CBE’s foreign assets deficit, recording a surplus of $10.3 billion in June compared to a deficit of $11.4 billion in January.
Controlled inflation and tightened monetary policy
The source also asserted that inflation rates were successfully controlled by the bold decisions taken since August 2022, reaching 27.5 percent, the lowest level since February 2023. Since the Russian-Ukrainian war eruption in March 2022, the CBE has started tightening its monetary policy, hiking the key interest rates by 19 percent (1900 bps).
New government program, fiscal targets
Prime Minister Mostafa Madbouly announced the new government program in July, stating that one of its goals is to rationalize public spending and decrease public debt. The government also intends to increase private investments to 60-65 percent of the total and raise the annual growth rate of FDIs to reach 14 percent by 2030.
Debt reduction efforts
Egypt is committed to decreasing its debt-to-GDP ratio to under 80 percent by 2027, with 50 percent of the initial public offering (IPO) program directed towards reducing the government’s debt. Egypt expects to decrease the debt-to-GDP ratio to 82.6 percent in 2025, down from 90 percent in 2024.
Short-term external debt
As for the short-term external debt, it reached its highest point in the first quarter of FY2023/2024 at a value of approximately $30.27 billion, according to the source.
Improving yield curve
The source also noted a positive outcome in the yield curve of Egypt’s dollar-denominated bonds due in January 2027, declining from 22.86 percent in October 2023 to 9.2 percent in June 2024.
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