Egypt aims to reduce its debt rates to 80% by 2027

CAIRO - 18 April 2024: Egypt is working through an integrated strategy to manage and reduce its debt rates to less than 80 percent by 2027. This strategy aims to extend the life of debt and minimize its burden and cost. The strategy involves a shift from short-term issuances to medium- and long-term issuances, intending to gradually reduce the debt service bill over the medium term, according to Minister of Finance Mohamed Maait.

 

Maait stated that the government aims to extend the average life of its debt from 3.2 years in June 2023 to 4.5 or 5 years by June 2028. This extension will significantly alleviate the burdens and costs associated with servicing the debt, providing the government with greater financial flexibility. He announced this in press statements on the sidelines of the spring meetings of the International Monetary Fund (IMF) and the World Bank in Washington.

 

A key aspect of the strategy involves diversifying financing sources and tools, with an emphasis on utilizing low-cost green bonds, Sukuks (Islamic bonds), and other non-traditional instruments. The government is actively exploring options such as Samurai and Panda bonds, though any international market launches are not expected before the end of the current fiscal year in June.

 

Maait reaffirmed the government's commitment to meeting all payment obligations on their due dates and maintaining the same conditions as the initial issuances. This commitment ensures transparency and stability in the financial markets while fostering investor confidence.

 

The recent and anticipated cash flows, coupled with the ongoing economic reform program supported by the International Monetary Fund (IMF), have contributed to easing financing pressures and reducing the immediate need for additional funds. These positive developments highlight the Egyptian economy's ability to attract more investment flows, as demonstrated by the successful Ras El Hekma deal.

 

Furthermore, the government plans to allocate half of the proceeds from the Initial Public Offering (IPO) program to directly reduce government debt and improve public finance indicators. This strategic move underscores the government's determination to enhance its financial position and bolster the overall economic outlook.