The Finance Ministry is preparing to release the new public debt policy document by the end of March, which will outline its plans for public and foreign debt — including the issuance of green bonds, sukuk, and international bonds, a government source told EnterpriseAM. This will provide investors with clarity on international offering plans and strategies for returning to international debt market indices to attract new investors.

The upcoming debt policy is focused on extending debt maturities by diversifying debt instruments, while targeting overall debt reduction. It includes maintaining external debt for budget entities at USD 79.1 bn by the end of September, marking a USD 3 bn reduction, according to our source. The government is also working to trim these debts by USD 1-2 bn in the mid-term, which will lead to a gradual improvement in our debt position, longer debt maturities, and lower interest dues, the source added.

INTRODUCING A THREE-YEAR BUDGET

The Madbouly government is currently working on two parallel budgets, with the upcoming FY 2025-2026 budget being simultaneously developed alongside a comprehensive three-year budget that will establish longer-term spending caps that can only be exceeded under very limited circumstances. Government entities will submit their budget proposals according to this new timeline, according to our source.

The Why: The new approach allows the government to implement more long-term and sustainable policies with more precise financial limits to help target public debt reduction. It will also better establish the roadmap for government investments aligned with the Planning and International Cooperation Ministry's economic development plan. The framework will assist in developing state resources, reducing expected deficits, and managing anticipated revenues, including special accounts that could help ease pressure on the state budget, the source explained.

Each ministry will receive a cabinet-approved spending cap that cannot be exceeded, but this new system will give entities more flexibility to manage their spending and allocations. Ministries will be able to shift funds between different budget items or projects as long as they remain within their overall limit, without having to go through numerous entities before the change is approved.

ALSO- The Investment Ministry is working on coming up with a decent estimate of the country’s FX needs by meeting with the private sector, government bodies, and others. The hopefully more accurate figure is designed to help build a framework to manage the country’s FX resources in light of commodity imports, interest payments, and public debt.

What’s next: The Finance Ministry set to begin conducting studies to verify the appropriate financial caps and any developments for different entities in February. The ministry will discuss any substantial changes to government entities’ plans before preparing the annual budget for submission to the House.

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