Test Debt Guide

Country Debt Guide
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Egypt
Debt History
From the 1970s through to the early 1990s the
Egyptian government borrowed extensively
from its Arab neighbours and the Western
countries as it invested heavily in military
purchases and training, in order to manage a
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porous border with Israel.
EGYPT IN 2021
2.8% economic growth
112% public debt to GDP ratio
-8.1% budget balance
4.5/ 8 DR’s Debt Transparency Index
This resulted in an accumulation of debt that peaked at 137% of GDP in 1992, whilst robust growth in the latter
half of the 1990s led to a period of fiscal surpluses and a gradual reduction in the debt to GDP ratio, which fell to
67% by 2000. Egypt was never part of HPIC and no debt cancellation from China has been announced by Egypt
over that period.
Over the past decade, Egypt’s overall macro-financial performance has been mixed. GDP growth averaging 4.7%
since 2015, driven by tourism, construction and oil and gas, and is the only North African economy expected to
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grow in 2020, despite the COVID crises. However, over the same time period the government has consistently
run double digit fiscal deficits, resulting in a steady increase in its debt stock. In 2016, the country implemented
economic policy changes including reducing public spending, tighter monetary policy and targeted social
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transfers to replace expensive fuel subsidies. Since the start of the policy changes, the fiscal deficit has narrowed
by 5 percentage points to 7.4% while public debt to GDP is gradually reducing from its 20-year high of 108%
recorded in 2017. The types of projects Egypt has initiated with loans from China and the World Bank are shown
below, as a means of illustration.
The IMF’s assessment of Egypt’s debt sustainability has been moderate in the run-up to the COVID-19 pandemic.
It expressed confidence in Egypt’s ability to weather capital outflows on the back of foreign reserves (totalling
$44.5 billion) built up following the abandonment of a fixed exchange rate regime. Further, profitable and liquid
local banks hold the majority of debt denominated in the domestic currency, reducing the risk of a debt crisis.
Due to a relatively low share of external debt at about 40% of GDP, Egypt’s Fitch credit rating has remained stable
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at ‘B+’ as of mid-2020 – which is below investment grade and highly speculative but suggests an ability to meet
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current financial commitments assuming no further economic shocks.
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