Egypt Repays $25 Billion in Public Debt, Garners Investor Optimism
CAIRO, [Date] – In a significant stride toward financial stability, Egypt has successfully repaid $25 billion of its domestic and external public debt since March, equating to 7 percent of the nation’s Gross Domestic Product (GDP), as reported by the Institute of International Finance (IIF).
This revelation emerged during a virtual assembly comprising 100 speakers and participants who convened to scrutinize Egypt’s economic climate. The debt repayment was bolstered by a development accord for the Ras El-Hekma coastal zone, inked with the United Arab Emirates in February. This arrangement entailed the conversion of $11 billion in Emirati deposits at the Central Bank of Egypt into local currency investments and the repayment of $2 billion in Eurobond holdings.
Positive Sentiments Among International Investors
Global investors have expressed renewed confidence in Egypt’s economic trajectory, lauding the nation’s robust fiscal discipline and achievement of financial benchmarks. The country is targeting a primary budget surplus of 3.5 percent of GDP for the 2024/2025 fiscal year, a noticeable increase from the 2.5 percent estimated for 2023/2024. Should these targets be met, it would signify the highest surplus since the onset of the COVID-19 pandemic in 2020.
Strategic Debt Reduction Plans
Egypt aims to utilize 50 percent of proceeds from its government Initial Public Offering (IPO) program to mitigate its public debt, which stood at 98 percent of GDP in the 2022/2023 fiscal year. Convergence at the virtual meeting indicated a consensus that Egypt is poised to sustain primary surpluses, propelling public debt below 80 percent of GDP by 2027.
Fiscal Tightening and Structural Reforms
The IIF anticipates that Egypt’s fiscal tightening measures, under its International Monetary Fund (IMF) loan agreement, will further curtail public debt by fostering larger primary surpluses. Attendees acknowledged that recent reforms have significantly trimmed off-budget spending, historically a major drain on government resources. There is an expectation that the central bank will soon commence reducing interest rates, which would alleviate the government’s substantial interest burden on existing debt.
Declining Inflation and Prospective Interest Rate Cuts
Egypt has experienced a downturn in annual inflation in recent months, with projections indicating a fall below 15 percent by February 2025. Concurrently, interest rates are forecasted to be reduced by 4-8 percent by June 2025, driven by the declining inflation rates.
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