Egypt external debt makes record drop

Alamy

• 5-month drop of 8.4%
• UAE debt swap helped
• Foreign reserves boosted

Egypt’s external debt decreased by over $14 billion between December 2023 and May 2024, the steepest drop on record according to its Central Bank (CBE).

External debt fell from a record high of $168 billion at the end of December to $154 billion at the end of May, a decrease of 8.4 percent.

The drop followed the disbursement of $24 billion in fresh dollars and an $11 billion debt swap deal with the UAE between February and April. This was part of a deal with Abu Dhabi sovereign wealth fund ADQ to develop the area of Ras El Hekma on the north coast.

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In June, the CBE’s foreign reserves hit an all-time-high of $46 billion, up $300 million compared to the previous month. It was an increase of a third year-on-year compared to the nearly $35 billion registered in June 2023.

The CBE also cited a trebling of “foreign currency resources in the local market”. A previous doubling of remittances since it devalued the Egyptian pound in March was linked to the foreign liquidity boost from the Ras El Hekma deal.

Various ratings agencies adjusted their economic outlook for Egypt afterwards, with Moody’s revising its outlook up from “stable” to “positive” in March.

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Egypt’s debt obligations have greatly increased under the current administration. It has prioritised expensive megaprojects, including the construction of a new capital city, and state interventions to maintain the exchange rate of the Egyptian pound.

Last year Egypt’s external debt-to-GDP ratio reached 43 percent whilst total debt-to-GDP reached over 95 percent. The government has said it aims to reduce this to less than 80 percent by 2027. It has instituted a series of austerity measures, including raising the price of subsidised bread for the first time in decades.

Last Wednesday finance minister Ahmed Kouchouk reported that Egypt’s budget deficit narrowed to EGP 505 billion ($10.4 billion) in 2023/24.

That compared to EGP 610 billion the previous financial year. Its primary surplus increased from EGP 164 billion to EGP 857 billion.