Egypt’s external debt declines 5% in Q4 FY2023/24: WB

Egypt's external debt surged to a record high of $168.1 billion in 2023, a 2.9 percent increase from the previous year, according to the World Bank's International Debt Report (IDR) released on Tuesday. This marks the highest debt level since 2012.

On a positive note, data from the Central Bank of Egypt (CBE) revealed a 5 percent decline in external debt to $152.88 billion during the fourth quarter of the FY2023/2024, compared to $160.60 billion in the preceding quarter.

The Egyptian government remains steadfast in its commitment to reducing debt levels. The target is to bring the debt-to-GDP ratio down to 88 percent in the current fiscal year and below 80 percent by FY2026/2027.

According to the IDR, in 2023, Egypt's external debt accounted for 239 percent of export revenues and 44 percent of its Gross National Income (GNI). These are financial metrics used to assess a country's debt burden, with a higher percentage for either metric indicating a heavier debt burden, as a larger portion of the country's export earnings or economic output is needed to service the debt.

Debt service payments further highlighted this pressure, consuming 30 percent of export earnings and 6 percent of GNI.  

The composition of Egypt’s external debt in 2023 revealed that private creditors held the largest share, accounting for 38 percent. Within this category, bondholders represented 23 percent, while other commercial creditors accounted for 15 percent.

Multilateral institutions, including organizations such as the International Monetary Fund (IMF) and the World Bank, held 35 percent of the debt. The IMF contributed 12 percent, the World Bank 9 percent, and other multilateral lenders 14 percent.

Bilateral creditors made up 27 percent of the debt, with Kuwait, Saudi Arabia, and the United Arab Emirates contributing 5 percent, 5 percent, and 4 percent, respectively.

In 2022, the breakdown of Egypt’s external debt showed similar trends. Multilateral institutions accounted for 37 percent, with the IMF contributing 14 percent, the World Bank 9 percent, and other multilateral lenders 14 percent. Bilateral creditors represented 27 percent, including contributions of 5 percent each from Saudi Arabia, the UAE, and Kuwait, while other bilateral sources contributed 12 percent.

Egypt's total external debt stock has grown substantially over time, rising from $36.8 billion in 2010 to $168.1 billion in 2023. Long-term external debt followed a similar trajectory, increasing from $32.3 billion to $119.3 billion over the same period.

Multilateral debt rose to $32 billion in 2023, while bilateral debt, which peaked at $36.4 billion in 2019, declined slightly to $35.9 billion.

Private creditors also saw a significant increase in their share of Egypt’s debt, with bondholder debt climbing from $3.3 billion in 2010 to $29.8 billion in 2023 and commercial debt rising from $851 million to $19.7 billion.

The World Bank also praised Egypt for its efforts in diversifying its debt portfolio, pioneering several innovative instruments in the Middle East and North Africa (MENA) region.

In 2023, it became the first MENA country to issue a three-year Panda bond worth 3.5 billion yuan in the Chinese bond market. This followed other milestones, including the issuance of the region's first green bond in 2020 and a 60-billion-yen Samurai bond in 2022, marking Egypt’s entry into Japan’s capital markets.

The IDR emphasized the challenges facing Egypt and other LMICs in navigating a global economic landscape, stating that “the path to recovery in these countries will be fraught with challenges as they navigate a complex landscape of rising borrowing costs, weaker external demand, and volatile exchange rates.”

It urged international financial institutions and governments to address these vulnerabilities through coordinated action and structural reforms.