The Ministry of Finance said that the government manages macroeconomic risks flexibly to cope with consecutive external shocks. It balances and carefully addresses the negative effects of geopolitical tensions on economic activity. The government aims to meet citizens’ basic needs, expand social protection, and maintain financial discipline amid complex challenges.
The Ministry said that the government’s flexible approach to global economic crises was reflected in a balanced performance of the state’s general budget in the first half of the current fiscal year 2023-2024 (July to December). It recorded a surplus of EGP 150bn, compared to EGP 25bn in the same period last year. Despite fulfilling budgetary requirements and increasing expenditures by 56%, the government aims to ease burdens on citizens.
The Ministry said that Moody’s did not consider the government’s current efforts when it changed the outlook to negative. The bond program strengthens our ability to meet financial needs over the next two years, attracts more investment flows, and reduces dependence on external financing. The state’s success in divesting from economic activities, valued at $3.5bn in bond offerings, helps increase foreign cash flows to cover Egypt’s economic needs.
The government emphasizes the possibility of obtaining $5bn annually under favourable conditions from multilateral development banks, reflecting international confidence in Egypt’s economic policies for fiscal discipline. The government focuses on sustaining a primary surplus, implementing structural reforms for comprehensive development, and diversifying funding sources.
The Ministry outlines the sources for external financing needs of the state budget, targeting $4 billion by the end of the current fiscal year. The government continues to diversify international markets, recently re-entering the Japanese market with a Samurai bond issuance worth JPY 75bn, equivalent to around $500m, at an attractive annual yield of 1.5% for a 5-year term. It also issued sustainable international bonds in the Chinese “Panda” market to finance projects worth CNY 3.5bn, equivalent to around $500m.
The Ministry assures that the government is working to reduce the debt-to-GDP ratio, currently impacted by inflation, interest rate hikes, and exchange rate fluctuations. It has taken new measures and reformative actions, such as setting a binding ceiling on annual burdens to ensure a downward trajectory for the debt-to-GDP ratio, reaching below 85% by June 2028. It also extended the maturity of budget devices’ debt to 4 years from the current 3 years, to reduce the need for rapid financing.
The government’s strategy, subject to annual updates, focuses on lowering the debt-to-GDP ratio and service, developing the government securities market to attract more investors, and diversifying financing sources.
The strategy includes a new approach to climate-friendly debt swaps and promoting environmentally friendly investments, as well as issuing new and cost-effective instruments such as sukuk, green bonds, and sustainable development bonds.
