Egypt’s external debt obligations for 2025 — and how they will be covered — have been cause for speculation: Egypt’s external obligations are estimated to be around USD 55 bn between 2025 and the end of 2026 — with USD 33.2 bn in 2025 alone — Al Ahly Pharos said in December in a research note seen by EnterpriseAM. Meeting these liabilities will require substantial FDI inflows or additional borrowing, making large FDI transactions and asset sales critical for short-term economic stability.

Remember- 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 previously told us.

What we know so far: The ministry’s 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, unchanged from September 2024. 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.

Where Egypt’s foreign debt currently stands: Egypt’s foreign debt inched up 1.5% q-o-q to USD 155.2 bn during the first quarter of the current fiscal year, up from the USD 152.9 bn recorded at the end of FY 2023-24. On an annual basis, the country’s external debt fell by just under 5.7% from the USD 164.5 bn recorded in the first quarter of the last fiscal year. Medium- and long-term debt accounted for some 82% of the country’s total foreign debt with USD 127.5 bn, while short-term debt made up the remaining USD 27.7 bn.

The government is aiming for an annual external debt reduction of USD 1-2 bn, in what represents the core goal of its new debt strategy, a government source said. One of the ways to do this would be for the government to reduce dependence on debt rollovers by paying off obligations using real investment inflows and FX revenues, they added. The government is also looking to convert a portion of its debt — particularly Gulf deposits — into investments as a means to reduce external debt, according to the source.

How much do we owe this year? Credit rating agency Moody’s expects Egypt’s external debt servicing payments to peak at USD 33 bn — equivalent to 9.5% of GDP — this fiscal year, USD 4 bn of which is in GCC deposit rollovers, along with a current account deficit of USD 18.5 bn — equivalent to 5.3% of GDP — the agency said last month. The country will also have short-term external debt rollovers of USD 26 bn — USD 11 bn of which is in GCC deposit rollovers — the agency said.

Remember-Egypt returned to international debt markets with its first USD bond issuance in nearly two years in January, issuing USD 2 bn in five- and eight-year bonds. The absence from international debt markets came on the back of high global interest rates and domestic currency market instability, which had discouraged the issuance of USD-denominated debt on international markets.

“We expect more issuances” from Egypt, Goldman Sachs’ Farouk Soussa told Asharq Business. “From a debt-to-GDP level, the capacity is relatively limited, but there’s ongoing de-leverage — they borrow USD 2 bn because they’re repaying USD 3 bn, so overall debt-to-GDP is coming down. But they have to borrow in order to finance the repayments, and so we expect them to continue to borrow going forward,” he said. Soussa pointed to specific pressures affecting Egypt’s outflows, saying that “the energy balance is very difficult for Egypt, you have arrears that are getting paid to international oil companies, and you still have low Suez Canal receipts, meaning that there’s a deficit.”

The government is banking on the privatization program as a means of bringing down Egypt’s debt-to-GDP ratio, which is expected to decline to approximately 84.5% by the end of the current fiscal year, down from last year’s high of 89.6%. It is then expected to further decrease to 81% in the FY 2026-27, then decline further to 64% in 2029 before reaching closer to 60% by the end of 2030. The Finance Ministry is planning on using a portion of the proceeds from the state asset sales program to support the state budget, reducing government debt for budgetary entities, a government source told EnterpriseAM, adding that the Ras El Hekma agreement already helped alleviate budgetary debts by some USD 3 bn.

Our energy bills are getting increasingly hefty: The government is expected to settle all dues owed to foreign energy companies operating out of Egypt by the end of the year, a senior government official previously told us. The Madbouly government paid some USD 1 bn in overdue arrears last month and made a similar payment in early January, building on a similar payout made in November, according to previous reports. The government has since agreed on a repayment schedule with international oil companies, with payments rolling out through June 2025.

Funds from development partners and banks will play a bigger role in our external debt strategy: The government aims to rely more heavily on financing from development partners, development banks, and bilateral or multilateral agreements at favorable interest rates, our source said. In that sense, the Finance Ministry is expected to scale down new international debt issuances in the new budget to an estimated USD 3-4 bn, shifting its attention toward more diverse financing sources, they added.

Carry-trade transactions will also be important: “Although carry-trade transactions are expected to be less significant than before 2022, due to the increased bilateral financing and FDI, they are still an important factor in the balance of payments,” according to a report (pdf) from French banking giant BNP Paribas. The bank sees net investment inflows linked to carry-trade transactions covering “19% and 12% of the total external financing requirement (current account deficit and amortization of external debt) in FY 2025-26 and FY 2026-27, respectively,” the report reads.

Risks remain for carry-trade transactions: Should US interest rates remain stable while Egypt reduces rates, the appeal of EGP-denominated securities would fall; meanwhile, any further hits to the value of the EGP would represent an “additional negative factor to the appeal of Egyptian securities in local currency,” according to BNP Paribas.

This sentiment was echoed by Moody’s, which said that “Egypt’s high, albeit declining, debt ratio, very weak debt affordability compared to peers, and its persistently large domestic and external financing needs constrain the credit profile. These constraints raise the economy’s susceptibility to capital outflows in case of external shocks that could challenge the authorities’ commitment to a floating exchange rate policy, which in turn could result in the reemergence of external imbalances and erosion of foreign-currency buffers.”

Paying off our FX-denominated debt has been a hassle for the gov’t: “Foreign currency debt servicing has increased significantly in recent years and is contributing to the vulnerability of Egypt’s external finances. In FY 2024-25, interest payments on foreign currency debt were equivalent to 9% of total foreign currency revenues, compared with an average of 3% between 2018 and 2022,” BNP Paribas said.

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