Land, bonds, and reducing the deficit... How does Egypt plan to reduce public debt?

Egypt seeks to reduce the proportion of public debt to about 69.5% of gross domestic product by 2030, by reducing the budget deficit, increasing public and tax revenues, rationalizing spending, in addition to setting specific ceilings for domestic and external debt and sovereign guarantees, and diversifying financing tools, within the framework of a government plan aimed at reducing the burden of debt service and making greater resources available for spending on priority sectors. These targets come at a time when the government is following up on the implementation of the recommendations of the Egypt 2026 Forum, as Egyptian Prime Minister Dr. Mostafa Madbouly held a meeting to follow up on the executive position of the recommendations related to reducing the debt of public budget agencies, in cooperation with government agencies, and directed the preparation of a detailed plan that includes specific tasks for each ministry and government agency, in preparation for presenting it to Egyptian President Abdel Fattah El-Sisi.

During the meeting, Egyptian Finance Minister Ahmed Kajouk reviewed the development of the ratio of debt of public budget agencies to the gross domestic product, explaining that it declined by about 14% during the period from June 2023 to June 2026. The external debt of budget agencies also decreased during the fiscal year 2025/2026, equivalent to about 3.9% of the gross domestic product. In his explanation of the government target, the former Chairman of the Plan and Budget Committee in the House of Representatives, Dr. Fakhri Al-Feki, said that reducing this percentage requires working on two parallel tracks; The first is to reduce the budget deficit by increasing public revenues, especially tax revenues, and rationalizing spending, and the second is to limit borrowing and set limits on domestic and external debt to budget agencies, as well as controlling the guarantees issued by the state.

Al-Fiqi explained that the budget deficit amounted to about 1.5 trillion pounds ($28.71 billion) during the previous fiscal year, noting that the government aims to reduce it to about 1.1 trillion pounds ($21.05 billion) during the fiscal year 2026/2027, which will contribute to reducing financing needs and reducing pressure on debt. He added that the budget aims to increase total revenues to about 4.1 trillion pounds ($78.47 billion) during the current fiscal year, compared to 3.1 trillion pounds ($59.33 billion) during the previous year, while aiming to raise tax revenues to 3.5 trillion pounds ($66.99 billion), compared to about 2.6 trillion pounds ($49.76 billion).

Regarding external debt, Al-Fiqi said, in special statements to Ofek News in Arabic, that Egypt’s total external debt amounted to about $166.5 billion as of last June, explaining that this total includes the debts of the general budget agencies, the Central Bank, economic bodies, state-owned public companies, and public banks. He added that the external debt of the budget agencies represents about half of the total external debt, explaining that it decreased from about 82 billion dollars to about 80 billion, and then to about 78 billion dollars, as a result of paying amounts that exceed the value of the new external borrowing, which contributes to gradually reducing the balance of debt.

Al-Fiqi pointed out that continuing to reduce debt requires setting ceilings on the local and external debt of the budget agencies, and not exceeding them except in cases of necessity, and after providing clear justifications and obtaining the necessary approvals, in addition to limiting the sovereign guarantees issued by the state. Regarding the Ministry of Finance’s guarantees to economic entities, he explained that their issuance should be limited to necessary needs, such as financing the import of equipment that is not manufactured locally, noting that the beneficiary entity remains the primary debtor, and the Ministry of Finance does not intervene to pay the obligations except in the event of the borrower’s default, within the limits of the guarantee issued by it.

He added that diversifying financing tools represents one of the important paths to debt management, including sovereign bonds that can be based on assets or usufruct rights, allowing the state to benefit from its assets to provide new financing tools. In this context, Al-Fiqi touched on the allocation of lands in the Red Sea Governorate for the benefit of the Ministry of Finance, explaining that benefiting from them in issuing sukuks does not mean selling them or transferring their ownership to investors, but rather the right to benefit from them or the proceeds from their development can be used in financing operations.

He pointed out that sovereign sukuks are linked to assets or beneficial rights, and investors receive a return throughout the issuance period, with the nominal value recovered upon maturity, without this meaning the transfer of ownership of the land to the sukuk holders. These issues can be offered in local or foreign markets, allowing the diversification of the investor base, including investors in the Gulf states, Malaysia and Indonesia.

Al-Sisi issued Republican Decree No. 448 of 2026 amending the allocation of an area amounting to about 26.69 thousand acres in the Red Sea Governorate, equivalent to about 112.12 million square meters, for the benefit of the Ministry of Finance, to include the purposes of the allocation to reduce public debt and issue sovereign bonds. The decision amends Article 1 of Presidential Decree No. 222 of 2026, which had allocated the same space for the Ministry of Finance for the purpose of issuing sovereign bonds, before the amendment added the goal of reducing public debt to the purposes of allocation.

A presidential decree issued in June 2025 allocated another area of ​​about 41.52 thousand acres in the Red Sea Governorate, equivalent to about 174.4 million square meters, for the benefit of the Ministry of Finance, to be used to reduce public debt and issue sovereign bonds. The Ministry of Finance had previously made it clear at the time that the use of these lands was not limited to using them to guarantee the issuance of sukuk, but also included the possibility of developing them and entering into partnerships with government agencies operating in the financial sector and economic bodies, with the aim of replacing part of the existing debt on the budget agencies of these agencies with joint investments, and converting the lands into production, service, tourism and real estate projects, in a way that achieves economic returns and contributes to reducing the burden of debt service.

For his part, economic expert Khaled Al-Shafi’i said that reducing debt requires increasing state resources and reducing reliance on borrowing, in parallel with raising economic growth rates through localization of industry, attracting investments, and increasing financial flows, in a way that expands the size of the gross domestic product and enhances the economy’s ability to bear the burden of debt. Al-Shafi’i added, in special statements to Ofek News in Arabic, that achieving these goals faces challenges related to geopolitical tensions, supply chain disruptions, and high transportation and energy costs, which are factors that affect the cost of production and imports and impose additional pressure on the general budget.

Al-Shafi’i pointed out that controlling inflation and controlling markets could contribute to reducing the cost of borrowing, suggesting expanding the establishment of commodity exchanges in the governorates to monitor the volume of production, supply, and commodity trading movement, which would help limit monopolistic practices and control prices, and provide greater scope for lowering interest rates, and thus reducing the cost of servicing debt.