Egypt is seeking to convert $20 billion in foreign debt into direct investment projects, aiming to reduce its ballooning liabilities while complying with International Monetary Fund (IMF) reform recommendations, according to a senior official at the Ministry of Finance who spoke to Al Manassa.
The debt swap push is part of a broader restructuring strategy unveiled last week. The plan relies on two instruments, debt-for-investment swaps and debt-for-development agreements. The IMF, in its fifth and sixth loan program reviews, urged Egypt to rein in public debt while safeguarding social spending to protect vulnerable communities.
This is not a new tactic for the government. In February 2024, it signed a controversial $24 billion deal with UAE-based Modon Developmets to develop the Ras El-Hekma coastline. The agreement included converting $11 billion in Emirati central bank deposits into equity—a move critics say effectively handed national assets to foreign control.
The Finance Ministry source, who requested anonymity, said officials have opened negotiations with Germany, Italy, France, China, Kuwait, and Saudi Arabia to repurpose their debts into local investment ventures. “We’re ready to facilitate these conversions as quickly as possible,” the official said.
Debt swaps are mechanisms that transform foreign loans into capital for domestic projects, reducing Egypt’s external liabilities. Previous deals with Germany and Italy totaled more than $270 million, while a 2023 preliminary agreement with China is expected to convert roughly $9 billion tied to infrastructure loans—including the electric high-speed rail and the monorail—into investment.
Talks with Saudi Arabia are centered on converting over $10 billion in deposits held at Egypt’s central bank into projects in the Red Sea and northwest coast. “Saudi hasn’t objected,” the source noted, signaling possible Gulf acquiescence to the debt-equity model.
Egypt's current external debt stands at over $160 billion, roughly 44% of GDP. The government aims to lower this ratio to under 40% by 2026. Officials hope the debt conversion program will relieve fiscal stress and boost long-term economic resilience.
“The government is following a clear roadmap to mitigate debt risks and support financial sustainability,” the source said, noting new tools are being explored to manage the growing external burden.
