The Egyptian Initiative for Personal Rights (EIPR) is publishing the translation of its report on the status of Egypt's external debt, originally published on 17 January 2025, at a time when the Egypt’s economy is accelerating towards a new crisis point caused by the US and Israeli war on Iran and resultant the global economic fallout. Once again the risks of a very fragile economic stability—one dependent on increased borrowing—are becoming clearly manifest.

The report was published in January in response to statements made by Prime Minister Mostafa Madbouly which he expanded on in an article that he published later in January. In his statements and article the prime minister tried to deny his government’s and its policies' responsibility for the debt crisis ravaging the general budget and undermining its ability to cover the basic provisions of the Egyptian populace. This narrative was reinforced by President Sisi’s remarks in mid-March, in which he said 'everything that happened over these past five years—we were never the cause of it, ever.' However, he simultaneously emphasised the necessity of breaking the cycle of borrowing, asserting that 'it is neither logical nor fair to continue borrowing in hard currency to cover our needs.

The report, titled "Sinking into Quicksand?", reviews the policies pursued by successive governments since 2016 that have led to the exacerbation of external debts, as well as the policies proposed by the current government to exit the debt predicament after finally acknowledging that it is a predicament . In this context, the report analyzes the government's recent move to selling assets and swapping debts for investments, which the government sees as a way out of the mounting external debt crisis. News headlines every day carry the names of new coastal areas slated for sale, alongside companies and banks that the state targets for privatization, in order to raise the necessary funds to settle debts and fulfill the conditions of lending institutions to secure further loans, now that securing more loans have become essential to meet the installments of previous debts owed by Egypt in hard currency. The ratio of external debt reached 44.2% of Egypt's Gross Domestic Product (GDP) in June 2025, compared to a ratio not exceeding 15% in 2015, the year immediately preceding the unprecedented expansion of Egypt's external borrowing policy.

This policy has dragged Egypt into a vicious cycle of borrowing to buy time rather than resolving the structural crises afflicting the economy, which has caused the budget allocated for servicing these debt obligations to inflate in a manner that crowds out  basic requirements for spending on economic development and improving the population's standard of living, the budget allocations for which are shrinking year after year.

In an unusual step, the presidency of the cabinet (prime minister’s office)  published on its social media accounts an article by the Prime Minister in which he states that the issue of public debt and its service burdens raise a "legitimate question among citizens regarding the capacity to endure," but ultimately he shifts the blame for the exacerbation of the debt onto external crises. Prime Minister Mostafa Madbouly also pledged in mid-December 2025 to reduce the external debt-to-GDP ratio to 40%, a level close to that of June 2023.

However, tracing the trajectory of debts over the past decade indicates a different development from what the Prime Minister presents; the expansion in external borrowing was not primarily linked to global crises because it began years prior to them, particularly since 2016, and was effectively tied to financing non-productive projects that lack any developmental priority. Some of this came in the form of borrowing by state-affiliated public authorities to implement some of those projects, while the other portion was driven by the repayment of mounting debt obligations, the burden of which was severely aggravated by the repeated devaluation of the Egyptian pound – which in turn was part of the conditions set by international institutions to obtain loans.

 Borrowing through attracting "hot money" also played a significant role in the deterioration of the debt situation.This passage describes a specific economic phenomenon known as "Hot Money" volatility. The government borrows hard currency by issuing Treasury bills to foreign investors; however, those funds quickly exit the market whenever there is a fluctuation in global conditions. This leaves the state forced to provide immediate dollar liquidity to cover the value of these securities and their interest as soon as investors decide to exit. We witnessed this recurring scenario with the flight of at least five billion dollars in 'hot money' from Egypt within just a few days of the start of the war on Iran.

The EIPR report outlines the features of Egypt's external debt according to the latest available (published) data, and how the debt obliterates the impact of the recent improvement in the performance of certain economic sectors, especially with the rising cost of installment and interest payments, and the fact that debts due for repayment within less than a year have reached 112% of foreign exchange reserves. The report also reviews the risks the debt crisis poses to the economy and to Egypt's development trajectory, risks that are poised to increase significantly in light of the ongoing war, which threatens key foreign exchange resources and places immense pressure on state finances especially if it becomes a protracted war. The report highlights the role of the International Monetary Fund (IMF) and donor institutions in exacerbating and prolonging the debt trap. The report finally presents recommendations on the available and realistic policy avenues that could help us exit this predicament.

Among these recommendations for addressing the external debt crisis is a clear plan to reduce the state's reliance on borrowing as a primary source of funding. This involves not only setting a borrowing ceiling, but, more importantly, a serious orientation towards encouraging the productive and service sectors that generate income and value-added, alongside working to restructure tax policies to become more equitable and efficient to provide a sustainable revenue. It also recommends placing the external debt portfolio under parliamentary supervision, ensuring that no external debt is incurred without parliamentary approval, regardless of the borrowing entity. Furthermore, a repayment plan and a fund utilization plan must be submitted to the parliament. The parliament must have a role in determining the spending priorities of borrowed funds, as opposed to the status quo where the government handles this issue alone and without popular or any kind of meaningful oversight, despite the government itself being responsible for the escalating debt crisis. The report further recommends formulating a pre-announced five-year plan for projects to be financed through external borrowing, alongside a parallel plan to develop dollar resources to enable repayment; both should be approved by parliament through legislation, thereby holding the government accountable for compliance.

The report also calls for the need to reschedule debts, extend their currently severely low average maturity terms, return to a 90% long-term debt ratio (repayable over more than five years), and to make the terms and repayment conditions of the loans publicly available.

Read the full report here