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Egypt’s mounting debt raises doubts amid stalled reforms and inflows

High allocations and revenues tied to debt in the draft budget for the next fiscal year are causing concern at home and abroad.
Egypt bank

CAIRO — Egypt’s increasing reliance on debt is raising growing concern both at home and abroad about the impending repayment schedule and Cairo's struggle to secure external funds.

The draft budget for the 2023/2024 fiscal year unveiled by the Egyptian government on May 9 earmarks more than half of all allocations for debt service, and projects nearly half of all revenues to come from more debt. The news came after the world’s Big Three credit rating agencies and major investment banks had voiced concerns about Egypt’s ability to meet external debt obligations.

“Overall, the situation is concerning, but we do have more confidence that Egypt’s default avoidance options will work in the next two years,” Callee Davis, an economist at Oxford Economics Africa, told Al-Monitor. “However, after 2025 we see risks remaining elevated.”

From 2016 until shortly before the Russian invasion of Ukraine, Egypt became heavily dependent on portfolio investments — mainly hot money — to shore up its financial account, offset its current account deficit, and ultimately keep its external position afloat.

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