Analysis of Egypt's

External Debt
2019-2023

Original Work of Abdelrahman

Hussein
Contents
Introduction ............................................................................................................... 2
Total External Debt Trend: ............................................................................................. 4
Debt Composition: ....................................................................................................... 4
Debt by Type: ............................................................................................................. 4
Potential Economic Impact: ............................................................................................ 5
Potential Economic Impact: ............................................................................................ 5
Government External Debt: ............................................................................................ 8
Non-Government External Debt: ..................................................................................... 8
Predictions and Future Outlook: ...................................................................................... 9
Recommendations and Solutions: .................................................................................... 9
External Debt Indicators Analysis: .................................................................................. 11
Impact on the Economy: .............................................................................................. 12
Forecasting Trends: .................................................................................................... 15
Debtor Dynamics: ...................................................................................................... 15
Recommendations and Solutions: .................................................................................. 16
FDI Trends: .............................................................................................................. 17
Impact on Economy: ................................................................................................... 18
Recommendations for Debt Reduction and Economic Enhancement: ...................................... 18
Final Reflection on Egyptian External Debt: ...................................................................... 19

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 Introduction

Greetings and welcome to my comprehensive examination, titled "Analysis of Egypt's

External Debt." This report embarks on a thorough exploration of Egypt's economic
landscape, with a particular focus on the intricacies and implications of external debt.

External debt, while a potential catalyst for financing development, carries inherent risks.
When at excessive and unsustainable levels, it has the potential to strain a country's
economy. The burden of high debt levels can translate into increased costs for debt
servicing, diverting vital resources away from crucial public services and infrastructure
development.

Against this backdrop, Egypt finds itself grappling with a confluence of economic
challenges. Factors such as inflation, a rapidly growing population, and infrastructural
needs have contributed to a complex economic scenario. The additional strain from the
COVID-19 pandemic has notably impacted key sectors, including tourism and remittances,
further intensifying the economic challenges faced by the nation.

n response to these challenges, the government of Egypt has undertaken substantial

economic reforms in recent years. These reforms are strategically designed to address
structural issues and pave the way for a more resilient and diversified economy. The
overarching goal is to navigate through economic uncertainties, ensuring that Egypt
emerges with strengthened foundations capable of withstanding various challenges.

As we delve into the analysis of Egypt's external debt, it is against this backdrop of
challenges, reforms, and a commitment to resilience that we seek to provide insights and
recommendations. Our examination aims to contribute to a nuanced understanding of
Egypt's economic trajectory and foster discussions on sustainable fiscal practices.

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 External Debt by Type (US$ Million) 2019 2020 2021 2022 2023

Total External Debt 108,699 123,491 137,860 155,709 164,728

Long-term Debt 97,644 112,625 124,144 129,089 136,577

Rescheduled Debt* 3,127 2,500 1,926 1,275 1,005

ODA 2,989 2,418 1,901 1,260 997
Non-ODA 138 81 25 15 8

Non Rescheduled Debt 24,725 25,608 28,192 31,729 36,607

Buyers' & suppliers' credits 11,284 11,388 12,801 16,365 19,899
Repo 3,809 3,928 4,015 4,221 4,669
Paris Club countries 5,021 5,703 6,578 6,696 8,213
Other countries** 4,611 4,590 4,799 4,447 3,827

Multilateral Institutions 32,809 43,007 49,947 51,275 52,947

Bonds 19,372 23,899 28,709 29,013 29,479

Sovereign Notes 937 352 355 355 355
Euro-bond issued in US$ 14,103 19,356 23,128 23,550 22,432
Euro-bond dominated in EUR currency 4,332 4,191 4,489 3,931 4,067
Green-Bonds issued in US$ 0 0 737 737 737
Samurai-Bonds issued in JPY 0 0 0 440 419
SUKUK issued in US$ 0 0 0 0 1,469

Deposits 17,203 17,188 14,977 14,962 14,953

Private sector debt (non-guaranteed) 409 422 392 834 1,586

Loans 409 422 392 734 1,486
Green-Bonds issued in US$ 0 0 0 100 100

Short-term Debt 11,055 10,866 13,716 26,620 28,151

Currency and deposits*** 3,707 3,568 4,035 16,859 18,686
Loans and trade credits 7,349 7,298 9,681 9,761 9,465

Source: Central Bank of Egypt.

* According to the agreement signed with Paris Club countries on May 25, 1991.
** Including liquidity support facility agreement provided by China Development Bank to the Central Bank of Egypt.
*** Including the People's Bank of China's currency swap agreement with the Central Bank of Egypt.

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 Total External Debt Trend:

• The total external debt of Egypt has shown a consistent upward trend,
increasing from US$108.7 billion in 2019 to US$164.7 billion in 2023.

• This represents a substantial increase, raising concerns about Egypt's ability

to manage and repay its external obligations.

Debt Composition:

• Long-term Debt: Representing a substantial share of Egypt's external debt,

long-term debt has consistently dominated, comprising around 83% of the
total in 2023. This suggests a prolonged commitment, possibly impacting
fiscal flexibility and the ability to swiftly adapt to changing economic
conditions.

• Short-term Debt: Although comparatively smaller, short-term debt has seen a

notable increase, constituting around 17% of the total external debt in 2023.
The rise in short-term obligations raises concerns about Egypt's vulnerability
to sudden economic shifts and the potential for liquidity challenges.

Debt by Type:

• Rescheduled Debt: The declining trend in rescheduled debt is promising,

reflecting successful negotiations and a diminishing reliance on restructuring
arrangements. In 2023, rescheduled debt accounts for approximately 0.6% of
the total external debt.

• Non-Rescheduled Debt: A substantial portion of Egypt's external debt, around

22.2% in 2023, falls under the category of non-rescheduled debt. This includes
Buyers' & suppliers' credits, Repo agreements, and debt from Paris Club and
other countries.

• Multilateral Institutions: Multilateral institutions play a significant role,

accounting for around 32% of Egypt's external debt in 2023. While this source often
provides concessional terms, it comes with implications for policy influence.

• Bonds: Bond issuance, including Euro-bonds, represents approximately 18% of

the total external debt in 2023. This source introduces exposure to currency
and interest rate risks.

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 • Deposits: decreasing trend and constitute around 9.1% of Egypt's external
debt in 2023. Monitoring this trend is essential as it may impact liquidity and
short-term obligations.

• Private Sector Debt: Non-guaranteed private sector debt, comprising loans

and green bonds, is on the rise, reaching around 2.4% of the total external
debt in 2023. This signals an increasing reliance on private financing sources.

Potential Economic Impact:

• High levels of external debt can lead to increased debt servicing costs,
potentially crowding out essential public expenditures.

• Exchange rate fluctuations and interest rate hikes could exacerbate the
burden of external debt, impacting Egypt's economic stability.

• Continued monitoring and proactive management of external debt

are essential.

• If the current trends persist, Egypt may face challenges in meeting its debt
obligations, especially in the context of global economic uncertainties.

Recommendations and Solutions:

• Diversification of Funding Sources: Explore alternative sources of funding to

reduce reliance on debt issuance, such as attracting foreign direct investment
and promoting domestic savings.

• Enhance Debt Management: Strengthen debt management practices to optimize

the debt portfolio, minimize risks, and negotiate favorable terms with creditors.

• Economic Reforms: Implement structural reforms to enhance economic

productivity and attractiveness to investors, fostering sustainable growth.

• Transparency and Accountability: Enhance transparency in debt management

and ensure accountability in the use of borrowed funds to build trust with
creditors and investors.

• Monitoring and Adjusting Strategies: Continuously monitor economic

conditions, adjust debt strategies accordingly, and be prepared to adapt to
changes in the global economic environment.

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 External Debt by Debtor (US$ Million) 2019 2020 2021 2022 2023

Total External Debt 108,699 123,491 137,860 155,709 164,728

Long-term Debt 97,644 112,625 124,144 129,089 136,577
Short-term Debt 11,055 10,866 13,716 26,620 28,151

Total Government External Debt 57,272 69,352 82,446 82,275 83,428

Long-term Debt 57,272 69,352 80,446 82,275 83,428

Bonds & Notes 19,372 23,899 28,709 29,014 29,479
Loans 37,900 45,453 51,736 53,262 53,949
Short-term Debt 0 0 2,000 0 0

Total Non-Government External Debt 51,427 54,138 55,414 73,434 81,299

Monetary Authorities 27,979 27,886 25,567 40,882 43,617

Long-term Debt 24,776 25,227 22,716 25,195 25,730

Loans 6,324 6,802 6,458 6,433 5,972
Currency and deposits 17,203 17,188 14,977 14,962 15,953
Special Drawing Rights 1,249 1,236 1,282 3,800 3,804

Short-term Debt 3,203 2,659 2,851 15,687 17,888

Loans 587 117 64 0 0
Currency and Deposits 2,617 2,543 2,787 15,687 17,888

Banks 9,510 11,921 14,390 17,714 20,979

Long-term Debt 5,810 8,360 10,372 11,044 14,969

Loans 5,810 8,360 10,372 10,944 14,869
Debt securities 0 0 0 100 100

Short-term Debt 3,700 3,561 4,019 6,670 6,010

Loans 2,610 2,536 2,771 5,499 5,212
Currency and Deposits 1,090 1,025 1,248 1,172 798

Other Sectors 13,937 14,332 15,457 14,837 16,703

Long-term Debt (Loans) 9,786 9,686 10,610 10,575 12,450

Short-term Debt (Trade Credit and Advances) 4,152 4,646 4,847 4,262 4,253
Source: Central Bank of Egypt

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 External Debt by Debtor Analysis
2019&2020 2020&2021 2021&2022 2022&2023
(US$ Million)
Δ % Δ % Δ % Δ %
Total External Debt 14,791 13.61% 14,369 11.64% 17,849 12.95% 9,019 5.79%
Long-term Debt 14,981 15.34% 11,519 10.23% 4,946 3.98% 7,488 5.80%
Short-term Debt -189 -1.71% 2,850 26.23% 12,904 94.08% 1,531 5.75%

Total Government External Debt 12,080 21.09% 13,094 18.88% -170 -0.21% 1,153 1.40%

Long-term Debt 12,080 21.09% 11,094 16.00% 1,830 2.27% 1,153 1.40%
Bonds & Notes 4,527 23.37% 4,810 20.13% 304 1.06% 466 1.61%
Loans 7,553 19.93% 6,284 13.82% 1,526 2.95% 687 1.29%
Short-term Debt 0 N/A 2,000 N/A -2,000 -100.00% 0 N/A

Total Non-Government External Debt 2,711 5.27% 1,276 2.36% 18,020 32.52% 7,866 10.71%

Monetary Authorities -93 -0.33% -2,319 -8.32% 15,315 59.90% 2,735 6.69%

Long-term Debt 451 1.82% -2,511 -9.95% 2,479 10.91% 535 2.12%
Loans 479 7.57% -344 -5.06% -25 -0.38% -461 -7.17%
Currency and deposits -15 -0.09% -2,212 -12.87% -15 -0.10% 991 6.63%
Special Drawing Rights -13 -1.03% 46 3.69% 2,518 196.50% 4 0.11%

Short-term Debt -544 -16.99% 192 7.20% 12,836 450.28% 2,201 14.03%
Loans -470 -80.12% -53 -45.54% -64 -100.00% 0 N/A
Currency and Deposits -74 -2.83% 245 9.62% 12,900 462.82% 2,201 14.03%

Banks 2,410 25.34% 2,470 20.72% 3,324 23.10% 3,265 18.43%

Long-term Debt 2,550 43.88% 2,012 24.07% 672 6.48% 3,925 35.54%
Loans 2,550 43.88% 2,012 24.07% 572 5.51% 3,925 35.86%
Debt securities 0 N/A 0 N/A 100 N/A 0 N/A

Short-term Debt -139 -3.76% 458 12.85% 2,652 65.99% -660 -9.90%
Loans -74 -2.84% 235 9.27% 2,728 98.44% -287 -5.22%
Currency and Deposits -65 -5.97% 222 21.70% -76 -6.08% -373 -31.87%

Other Sectors 394 2.83% 1,125 7.85% -619 -4.01% 1,866 12.58%

Long-term Debt (Loans) -100 -1.02% 924 9.54% -35 -0.33% 1,876 17.74%
Short-term Debt (Trade Credit) 494 11.90% 201 4.33% -584 -12.06% -10 -0.22%

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Government External Debt:

• The government's external debt has seen a steady increase, highlighting a reliance
on borrowing to support public initiatives and stimulate economic growth.

• While long-term debt has been the primary contributor, the introduction of short-
term government debt in 2021 warrants scrutiny, as it may indicate a need for
quick financing.

Non-Government External Debt:

• The rise in non-government external debt reflects borrowing activities by monetary

authorities, banks, and other sectors. This diversification suggests a multi-faceted
approach to funding.

• This diversification reflects a multifaceted approach to financing, suggesting a

strategic response to varied economic needs.

1. Monetary Authorities:

• The monetary authorities have actively engaged in borrowing, primarily through

long-term debt, indicating strategic financial planning.

• Short-term debt growth, driven by loans and currency/deposits, may signify

flexible financing needs or liquidity management strategies.

2. Banks:

• Banks have significantly contributed to Egypt's external debt, particularly

through long-term debt in the form of loans and debt securities.

• The growth in short-term debt may reflect the need for quick financing,
potentially for facilitating short-term economic activities.

3. Other Sectors:

• Various sectors beyond monetary authorities and banks have participated in

external borrowing, demonstrating a broad-based involvement.

• Long-term debt in the form of loans has been the primary avenue for external
financing, while short-term debt is notably lower and largely related to trade
credit and advances.
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Predictions and Future Outlook:

1. Continued Monitoring:

• Ongoing monitoring of global economic conditions, interest rates, and exchange

rates is essential for predicting the trajectory of Egypt's external debt crisis.

• The potential for continued global economic uncertainties may exacerbate

challenges, making regular assessments imperative.

2. Potential for a Prolonged Crisis:

• The increase in short-term debt and the reliance on certain types of external
financing raise concerns about the sustainability of Egypt's debt structure.

• Prolonged global economic challenges, coupled with internal economic factors,

could contribute to a prolonged crisis if not addressed effectively.

Recommendations and Solutions:

1. Diversification of Funding Sources:

• Explore alternative sources of funding, such as attracting foreign direct

investment (FDI) and promoting domestic savings.

• Diversifying funding sources can reduce reliance on specific types of debt and
enhance financial resilience.

2. Structural Economic Reforms:

• Implement structural economic reforms to enhance productivity, attract investors,

and stimulate sustainable economic growth.

• Addressing issues such as bureaucratic red tape, corruption, and inefficient public
sector management can contribute to a more favorable economic environment.

3. Strategic Investments:

• Focus on strategic investments that have the potential to generate economic

returns and contribute to long-term growth.

• Ensure that borrowed funds are channeled into projects with positive economic
and social impacts.
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 Economic Data for Indicators (US$ Million) 2019 2020 2021 2022 2023

Total Exports (G&S) 52,919 47,665 44,672 70,832 74,186

Exports 28,495 26,376 28,677 43,906 39,624

Petroleum 11,557 8,480 8,597 17,977 13,817
Other Exports 16,938 17,896 20,079 25,929 25,808

Services Balance 13,037 8,973 5,119 11,159 21,927

Payments 11,387 12,316 10,876 15,767 12,636

Net International Reserves 44,481 38,176 40,584 33,380 34,828

Gross Official Reserves 44,485 38,180 40,591 33,385 34,830

Gold 2,821 4,076 4,111 7,314 7,738
SDRs 453 298 201 50 27
Foreign Currencies 41,204 33,806 36,279 26,021 27,065
Loans to IMF 7 0 0 0 0

Reserve Liabilities (-) 4 4 7 5 2

External Debt Service 13,400 17,200 15,800 26,300 25,400

Principal Repayments Registered 10,200 13,200 11,600 21,700 18,400

Interest Payments 3,200 4,000 4,200 4,600 7,000

Gross domestic product (GDP)* 318,680 383,820 424,670 476,750 409,771

Source: Centeral Bank of Egypt

External Debt Indicators 2019 2020 2021 2022 2023

External Debt /GDP 34.1% 32.2% 32.5% 32.7% 40.2%
External Government Debt / GDP 18.0% 18.1% 19.4% 17.3% 20.4%
Non-Government Debt / GDP 16.1% 14.1% 13.0% 15.4% 19.8%
Non-Government Debt / Total External Debt 47.3% 43.8% 40.2% 47.2% 49.4%
External Debt / Exports (G&S) 205.4% 259.1% 308.6% 219.8% 222.0%
Short-term Debt / External Debt 10.2% 8.8% 9.9% 17.1% 17.1%
Private Sector Debt / Total External Debt 0.38% 0.34% 0.28% 0.54% 0.96%
Short-term Debt / Net International Reserves 24.9% 28.5% 33.8% 79.7% 80.8%
Debt Service / Exports (G&S) 25.3% 36.1% 35.4% 37.1% 34.2%
Interest Payments / Exports (G&S) 6.0% 8.4% 9.4% 6.5% 9.4%

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External Debt Indicators Analysis:

1. External Debt to GDP Ratio:

• The external debt to GDP ratio has experienced an upward trajectory, rising from
34.1% in 2019 to 40.2% in 2023. This signals an increasing level of external
indebtedness in relation to the country's economic output.

• The significant jump in 2023 raises concerns about the sustainability of this ratio
and its potential impact on Egypt's creditworthiness.

2. External Government Debt to GDP:

• The external government debt to GDP ratio has varied, reaching its peak at 19.4%
in 2021 but dropping to 17.3% in 2022 before a slight increase to
20.4% in 2023.

• While the government's external debt relative to GDP remains moderate, caution
is needed to prevent an excessive build-up, which could strain
fiscal resources.

3. Non-Government Debt Indicators:

• The non-government debt to GDP ratio has seen fluctuations, indicating the
influence of borrowing activities by entities other than the government.

• The increase in 2023 to 19.8% suggests a growing role of non-government entities

in external borrowing.

4. Composition of External Debt:

• The non-government debt as a percentage of total external debt has consistently

increased, reaching 49.4% in 2023. This underscores the importance of non-
government entities in the overall external debt landscape.

5. External Debt to Exports (Goods and Services) Ratio:

• The external debt to exports (G&S) ratio, while exhibiting volatility, has been on
an overall increasing trend, indicating potential challenges in meeting debt
obligations through export earnings.

• The elevated ratio in 2021 raises concerns about the ability to generate sufficient
export revenue to service external debt.
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 6. Short-term Debt Indicators:

• The short-term debt to external debt ratio has shown an increasing trend,
reaching 17.1% in 2023. This signifies a growing reliance on short-term financing,
which can pose risks, especially in volatile global economic conditions.

• The short-term debt to net international reserves ratio has seen a sharp increase,
reaching 80.8% in 2023. This indicates vulnerability, as high short-term debt
relative to reserves may limit the ability to manage economic shocks.

7. Private Sector Debt to Total External Debt:

• The private sector debt to total external debt ratio has increased steadily,
reaching 0.96% in 2023. While still relatively low, the upward trend suggests a
growing role of the private sector in external borrowing.

8. Debt Service and Interest Payments:

• The debt service to exports ratio has been relatively stable, indicating a
consistent capacity to meet debt service obligations through export earnings.

• Interest payments as a percentage of exports have seen fluctuations, with a

notable increase in 2023. This suggests potential challenges in managing
interest payments from export revenues.

Impact on the Economy:

• The rising external debt to GDP ratio raises concerns about debt sustainability,
potentially limiting fiscal flexibility and diverting resources from essential
public services.

• Increasing short-term debt and its ratio to net international reserves pose risks,
making Egypt vulnerable to sudden economic shocks and limiting the ability to
manage currency fluctuations.

• The growing external debt to exports ratio suggests challenges in generating

sufficient export revenue to service debt, potentially impacting on the balance
of payments.

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 External Debt Forecasting (US$ Million) 2024 2025 2026 2027 2028

Total External Debt 181,380 195,807 210,235 224,662 239,090

Long-term Debt 148,315 157,748 167,181 176,614 186,047

Rescheduled Debt 671 448 300 200 134

Non Rescheduled Debt 38,338 41,326 44,315 47,303 50,292

Multilateral Institutions 60,216 64,746 69,203 73,610 77,984

Bonds 33,693 36,226 38,759 41,292 43,825

Deposits 13,838 13,166 12,493 11,820 11,147

Private sector debt (non-guaranteed) 1,559 1,836 2,113 2,389 2,666

Short-term Debt 33,065 38,059 43,054 48,048 53,042

External Debt by Debtor Forecasting (US$ Million) 2024 2025 2026 2027 2028
Total External Debt 181,380 195,807 210,235 224,662 239,090

Total Government External Debt 94,525 101,049 107,573 114,096 120,620

Long-term Debt 94,125 100,649 107,173 113,696 120,220
Short-term Debt 400 400 400 400 400

Total Non-Government External Debt 86,854 94,758 102,662 110,566 118,470

Monetary Authorities 46,468 50,895 55,322 59,749 64,177

Long-term Debt 25,291 25,479 25,666 25,854 26,041
Short-term Debt 21,177 25,416 29,656 33,895 38,135

Banks 23,522 26,395 29,268 32,141 35,014

Long-term Debt 16,411 18,512 20,612 22,712 24,812
Short-term Debt 7,111 7,884 8,656 9,429 10,202

Other Sectors 16,864 17,468 18,072 18,676 19,279

Long-term Debt (Loans) 12,487 13,109 13,731 14,352 14,974
Short-term Debt (Trade Credit and Advances) 4,378 4,359 4,341 4,323 4,305

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 Total External Debt Forecasting
300,000

250,000

200,000
164,728
155,709
150,000 137,860
123,491
108,699
100,000

50,000

0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Long & Short Term Debt Forecasting

200,000

180,000

160,000
136,577
140,000 129,089
124,144
120,000 112,625
97,644
100,000

80,000

60,000

40,000 26,620 28,151

11,055 10,866 13,716

20,000

0
2018 2020 2022 2024 2026 2028 2030

Long-term Debt Short-term Debt Linear (Long-term Debt) Linear (Short-term Debt)

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Forecasting Trends:

1. Total External Debt:

• The forecast indicates a consistent upward trajectory, projecting a robust

increase in total external debt, reaching US$239.1 billion by 2028.

• This emphasizes a sustained commitment to external financing, potentially

driven by ambitious development projects or economic expansion strategies.

2. Long-term Debt Dynamics:

• Long-term debt showcases a strategic approach, with the forecast reaching

US$186.0 billion in 2028.

• The nuanced balance between rescheduled and non-rescheduled debt suggests

a thoughtful debt management strategy.

3. Diverse Financing Sources:

• Multilateral institutions play a pivotal role, contributing significantly to external

debt, reflecting an ongoing collaboration with international financial institutions.

• The forecasted increase in bonds, deposits, and private sector debt indicates a
diversified financing landscape, promoting financial resilience.

4. Challenges in Short-term Debt:

• Short-term debt is poised to surge, highlighting potential liquidity management

challenges and the need for careful short-term debt strategies.

• The substantial forecasted rise demands innovative solutions to avoid undue

pressure on economic stability.

Debtor Dynamics:

1. Government's Steady Borrowing:

• The government's external debt forecast showcases a steady rise, suggesting a

persistent need for external financing to support public projects.

• The relatively stable short-term government debt implies a measured approach

to immediate fiscal demands.
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 2. Non-Government Entities and Economic Diversification:

• Non-government entities, including monetary authorities, banks, and other

sectors, demonstrate a commitment to external borrowing for various
economic activities.

• The forecasted growth signifies a diversified economic landscape, potentially

indicating a push for economic diversification.

3. Innovative Short-term Debt Management:

• The forecasted increase in short-term debt, especially for monetary

authorities, demands innovative short-term debt management strategies to
mitigate potential risks.

• Balancing short-term debt with net international reserves is crucial,

necessitating creative financial instruments and risk mitigation approaches.

Recommendations and Solutions:

• Sustainable Finance Initiatives: Introduce innovative financing mechanisms, such

as green bonds and sustainable development bonds, to attract socially responsible
investors.

• Export Diversification and Promotion: Develop and execute a comprehensive

export diversification strategy, leveraging emerging technologies and market
intelligence.

• Public-Private Partnerships: Encourage private sector participation through well-

structured PPPs for major infrastructure projects.

• Economic Diversification: Implement targeted policies to diversify the economy,

focusing on knowledge-based industries and high-value exports.

• Transparent Sovereign Wealth Fund: Establish a transparent Sovereign Wealth

Fund, ensuring accountability and responsible management of income from natural
resources.

• Inclusive Economic Growth: Prioritize policies that promote inclusive economic

growth to ensure benefits reach a broader segment of the population.

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 Foreign Direct Investment (US$ Million) 2019 2020 2021 2022 2023

Net Foreign Direct Investment 8,236 7,453 5,214 8,937 10,039

Inflows 16,394 15,837 13,915 22,206 23,053

USA 1,354 1,412 1,625 1,530 2,304
UK* - - 1,770 1,990 2,001
EU** 10,225 8,965 5,085 6,737 6,806
Arab Countries 3,080 3,875 3,123 8,236 7,290
Other Countries 1,734 1,585 2,312 3,712 4,652

Outflows (-) -8,157 -8,384 -8,701 -13,268 -13,014

Source: Central Bank of Egypt.

*
The UK officially left the EU (Brexit) on 31 January 2020.
**
Includes UK inflows through third and fourth quarters in 2020

FDI Trends:

• Net FDI shows a positive trend, increasing from US$8.2 billion in 2019 to US$10.0
billion in 2023.

• The consistent growth indicates a positive investment climate, with more inflows
than outflows.

• The European Union (EU) is a significant contributor to FDI inflows, with a notable
decrease in 2021.

• Arab countries have shown a substantial increase in FDI inflows, making them a
key source of investment for Egypt.

• Despite positive net FDI, Egypt has been experiencing consistent outflows,
reaching around US$13 billion in 2023.

• Strategies should be devised to encourage domestic investments to

minimize outflows.

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Impact on Economy:

1. Positive Economic Impact:

• FDI plays a crucial role in stimulating economic growth, creating job

opportunities, and facilitating technology transfer.

• Positive net FDI contributes to increased foreign exchange reserves, enhancing

economic stability.

2. Sectoral Impact:

• The detailed breakdown of FDI by country provides insights into sectors

attracting foreign investments, guiding future investment promotion strategies.

• A diverse inflow of FDI from different regions can contribute to the

development of various sectors, promoting economic resilience.

3. Debt Reduction Potential:

• FDI can be strategically utilized to decrease external debt by directing

investments toward projects that generate revenue, such as infrastructure
development or strategic industries.

Recommendations for Debt Reduction and Economic Enhancement:

• Promotion of Strategic Sectors: Identify and promote sectors with high growth
potential to attract FDI. Emphasize sectors that align with Egypt's economic
development goals, such as technology, renewable energy, and manufacturing.

• Investment Climate Enhancement: Improve the overall business environment by

reducing bureaucratic hurdles, streamlining regulatory processes, and enhancing
transparency. This will make Egypt more attractive to foreign investors.

• Diversification of Investor Sources: While EU and Arab countries are significant

investors, explore opportunities to diversify sources, including emerging markets
and non-traditional partners. This minimizes dependency on specific regions.

• Government Incentives and Guarantees: Introduce attractive incentives and

guarantees for foreign investors, such as tax breaks, repatriation guarantees, and
protection against expropriation. This enhances the overall competitiveness of
Egypt as an investment destination.
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Final Reflection on Egyptian External Debt:

Egypt's external debt landscape presents a complex tapestry of challenges and

opportunities that necessitate a comprehensive and strategic approach. As we delve into
various aspects of the external debt scenario, it becomes apparent that Egypt stands at
a critical juncture, balancing economic aspirations with the imperative of managing
debt sustainability. Here are key reflections encompassing the facets we've explored:

• Debt Dynamics: Egypt has experienced a steady increase in external debt over the
years, reflecting the country's ambitious developmental projects and economic
growth aspirations. While debt is a crucial tool for financing infrastructure and
stimulating growth, careful management is essential to avoid excessive burdens.

• Composition and Types of Debt: The breakdown of external debt by type and
debtor sheds light on the nuanced nature of Egypt's indebtedness. Long-term debt,
multilateral contributions, and bonds feature prominently, indicating diversified
funding sources. However, the rise in short-term debt raises concerns about
liquidity management and susceptibility to economic shocks.

• Economic Impact: The economic impact of external debt is multifaceted. While

debt can fuel economic expansion and development, a high debt-to-GDP ratio
poses risks, including potential fiscal constraints and vulnerability to external
shocks. Balancing the positive contributions of debt with its potential pitfalls is
crucial for sustained economic stability.

• Foreign Direct Investment (FDI): FDI emerges as a potential catalyst for

mitigating external debt challenges. The positive net FDI, coupled with inflows
from diverse sources, presents an avenue for leveraging investments to spur
economic growth and potentially alleviate debt burdens.

• Crisis Management and Innovation: The forecasting exercises underscore the

importance of innovative solutions for crisis management. Leveraging
technologies, sustainable finance mechanisms, and forward-looking economic
policies can position Egypt to navigate potential challenges and uncertainties
effectively.

• Striking a Balance: Achieving a delicate equilibrium between economic

development and prudent debt management is the overarching theme. Egypt's
policymakers face the challenge of steering the nation towards sustained growth
while safeguarding against the pitfalls of excessive indebtedness.
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 • Outlook: The trajectory of Egypt's external debt will hinge on the adept
application of the recommendations, adaptability to global economic shifts, and
the success of strategic initiatives. The country's ability to diversify revenue
streams, attract sustainable investments, and foster inclusive growth will shape its
economic future.

In conclusion, Egypt's external debt journey reflects the complexities inherent in

managing a burgeoning economy. The reflections underscore the importance of
strategic foresight, innovation, and a proactive approach in steering Egypt towards a
future characterized by economic vibrancy, fiscal resilience, and sustainable
development. The challenge lies not only in managing debt but in leveraging it as a
tool for transformative growth and long-term prosperity.

External Position of Egyptian Economy, Central Bank of Egypt

[Link]

External Debt, Central Bank of Egypt

[Link]

External Debt, Ministry of Finance

[Link]

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