The Finance Ministry aims to bring Egypt’s debt-to-GDP ratio down to a sustainable 71-73% by the end of FY 2028-2029 and lower its gross financing needs to 9-11% of GDP, according to the government’s new 2026-29 medium-term debt management strategy seen by EnterpriseAM. The strategy outlines a roadmap to resolve a critical fiscal bottleneck where interest payments currently devour 70-80% of tax revenues. It also aims to lower the annual debt service bill to 8.6% of GDP by 2028-29 from 11% in FY 2024-25.

Why it matters: Reducing debt service is now a top national priority, as the current interest burden leaves little fiscal space for social and developmental spending. A key driver for this reduction will be maintaining strict fiscal discipline through primary surpluses. After achieving a 3.5% primary surplus in FY 2024-25, the government plans to increase this to 4% in the coming FY to ensure a credible downward trajectory for the nation’s debt.

Curbing currency risks: To insulate the budget from exchange rate volatility, the strategy outlines a gradual reduction in the financial sector’s foreign debt, targeting an annual cut of USD 1-2 bn in government external debt. By the end of the strategy period, officials expect 80% of Egypt’s public debt to be denominated in the local EGP. These efforts are already bearing fruit, as Egypt’s five-year credit default swaps have dropped significantly from 1,858 bps in October 2023 to roughly 299 bps currently, reflecting improved investor sentiment and market confidence.

External debt as a “safety buffer”: Egypt is also adjusting its external borrowing habits to prioritize safety and sustainability. The country will rely more heavily on concessional and semi-concessional financing — a “safety buffer” that already constitutes 63% of its external debt structure. By prioritizing these funds over international bond issuance and expanding debt swap programs, the government has already achieved a USD 3.9 bn reduction in its external debt.

Domestic market development: The government plans to extend maturities and lower borrowing costs by issuing more medium-term bonds with three-, five-, seven-, and 10-year lifespans, with the potential for 15-year instruments in the future. The overarching goal is to extend the average maturity of government debt to 4.5-5 years. Additionally, activating the secondary market and introducing new instruments will help attract individual and institutional investors, reducing the heavy reliance on local banks to finance public debt.

Green + sustainable financing: Building on its status as a regional pioneer in green and Panda bonds, the country will leverage these tools alongside expanded local sukuk issuances, which are expected to attract Gulf investors. The instruments will mobilize funds for renewable energy and eco-friendly infrastructure, ultimately supporting broader national goals such as increased spending on health and education.

Tags: