FinMin swaps internal debt for shares to clean up balance sheets

The Finance Ministry is more than doubling the value of total capital injections it will make into indebted state-owned enterprises and agencies, with the figure rising to EGP 125.3 bn in the next budget from EGP 58.6 bn in the current fiscal year, according to a draft FY 2026-2027 financial statement seen by EnterpriseAM.

The ministry will take equity stakes in multiple state-owned enterprises and economic authorities in debt-for-equity transactions — taking equity and retiring debt owed to the ministry under sovereign-backed debt arrangements.

The result: Each of the entities will have cleaner standalone balance sheets going forward. Officials hope that lower levels of indebtedness will leave each of the institutions better able to manage their own debt levels in the future, matching the amount and tenor of the debt they take on to their ability to repay without unbudgeted assistance from the Finance Ministry. It’s one thing for FinMin to knowingly finance a subsidy when doing so is a clear government priority. It’s another thing entirely to have to clean up the mess when an agency goes into financial distress after having borrowed more than it could ever repay.

Why it matters: The capital injections are designed close a chapter that saw many public agencies take on substantial debt as part of Egypt’s massive infrastructure buildout. It’s also one part of an ongoing cleanup campaign that aims to bring the national debt-to-GDP ratio down by 3-4% to 78% by June 2027.

Where it all came from: State agencies took on significant debt to finance large-scale infrastructure projects, including the Cairo monorail and the high-speed electric train by the National Authority for Tunnels (NAT). The fundamentals of many projects were soon upended by successive currency devaluations that delivered a two-pronged blow: inflating the cost of construction beyond initial projections and undermining revenue assumptions meant to justify borrowing in the first place.

The move appears to be a direct response to the International Monetary Fund (IMF) classifying Egypt’s publicly backed debt as posing a form of “high risk of sovereign stress” in its most recent reviews (pdf) of the Mabouly government’s reform program. The talks emphasized the IMF’s longstanding concern that the government has been effectively co-signing loans for state companies, ballooning the total value of debt guaranteed by the sovereign to a staggering EGP 5.4 tn as of June 2025. The government has promised the IMF it would shrink the figure.

All 59 state economic authorities are now incorporated in the consolidated governmentbudget (another IMF requirement) for the upcoming fiscal year.

The big borrowers

The ministry’s contribution to NAT, for example, will jump by 1,307% to around EGP 19.3 bn — up from EGP 1.3 bn in the current budget. It’s part of a bid to right-size the balance sheet of an institution shackled to projects that were supposed to be paying their own bills by now. The treasury’s contribution to the Egyptian National Railways (ENR), which is engaged in an extensive modernization of a number of railway lines and as well as of rolling stock, will spike by 955% to approximately EGP 10.5 bn, up from just EGP 1 bn.

EgyptAir is a different story — the Finance Ministry isn’t swapping debt for equity there. The swaps for agencies including NAT and ENR are one-time things — EgyptAir is lossmaking thanks to ongoing running costs, and the Finance Ministry is hoping to leave its total earmark for EgyptAir Holding Company unchanged at EGP 8 bn. It also trimmed capital contributions to other economic authorities by around 9.9% to EGP 6.4 bn, down from EGP 7.1 bn.

The national carrier's debt is tied to recurring operational costs, including fuel, maintenance, fleet expansions and refurbishing, and below-market ticket pricing. EgyptAir operates a number of regional routes or flights that remain unprofitable, but are seen by some policymakers as public services, not commercial luxuries. EgyptAir carries heavy USD-denominated costs — fuel, spare parts, landing fees, ins., aircraft leases, and more.

The math on EgyptAir could be further complicated by a broader plan, reportedly in the works, to restructure the civil aviation and airports system and open it to private sector participation.