A growing debate is unfolding in Egypt over debt, with media figures calling for it to be written off in the hope that doing so could support the economy at this stage.
These calls were preceded by a request from Egyptian Foreign Minister Badr Abdelatty to his U.S. counterpart Marco Rubio, during a phone call between them at the end of last March, for “urgent” financial support to confront the repercussions of regional crises on the Egyptian economy.
In defending their position, a number of media figures pointed to the “scenario of writing off Egypt’s debts after the Gulf War.”
The United States had forgiven Egypt military debts amounting to $7.1 billion in 1991, following Cairo’s participation in the international coalition to liberate Kuwait after the Second Gulf War. Gulf countries, including Saudi Arabia, Kuwait, and the UAE, also announced the cancellation of debts owed by Egypt worth about $6 billion, while the “Paris Club” decided to gradually forgive half of Egypt’s debts, which exceeded $20 billion at the time.
Alongside these calls, a key question emerges regarding how realistic it is to repeat the debt write-off scenario under current international and regional conditions, and whether international parties are willing to provide similar support.
The State of Egypt’s Debt
Debt servicing costs reached about 50.2 percent of Egyptian government spending in the 2025–2026 budget.
This has led to a significant decline in spending on health and education as a share of GDP in Egypt—levels that also do not align with the Egyptian Constitution of 2014, which stipulates spending 4 percent of GDP on education and 3 percent on health.
Debt has also led to reduced spending on social protection programs, contributing to increased poverty rates, which reached 32.5 percent in 2019–2020, according to the latest official Egyptian data. The government has since stopped publishing the income and expenditure report prepared by the Central Agency for Public Mobilization and Statistics.
Dr. Sherine El-Shawarby, Dean of the Faculty of Politics, Economics, and Business Administration at May University, told Alhurra that “external debt has become a real burden on the economy, as data indicate it exceeded $163 billion by the end of September 2025, compared to only about $46 billion at the end of fiscal year 2013–2014, according to Central Bank data, reflecting a significant increase in burdens.”
Between January and September 2026, the Egyptian government is required to repay external debts estimated at $50.8 billion, some of which are deposits at the Central Bank, according to the external debt repayment schedule issued by the World Bank last January.
Prime Minister Mostafa Madbouly stated at the beginning of this year that the government is working with the Central Bank to reduce the debt-to-GDP ratio to its lowest level in 50 years.
These statements sparked debate at the time about how this reduction would be implemented, prompting Madbouly to later clarify that he meant the ratio to GDP, not the total debt figure, without any further updates being announced at the time of writing.
Dr. Pierre Khoury, Director of the Center for Policy and Knowledge Foresight in Lebanon, explained the distribution of creditors, saying: “There are international and multilateral financial institutions, debts to Arab countries, debts to Paris Club countries, and others to China. This debt map represents overlapping centers of political pressure and complicates dealing with it.”
Difficult Debt Relief
Observers believe it would be difficult for the Egyptian state to negotiate with all these entities and countries for partial debt relief, especially as external debt continues to rise periodically. What is happening to stabilize it at a certain level is essentially debt substitution—borrowing to repay old debt—and so on. They also rule out a repetition of the 1991 “debt write-off scenario.”
El-Shawarby, a former expert at the World Bank office in Cairo from 2001 to 2013, notes that “the cancellation of Egypt’s external debt in the 1990s was carried out by creditor countries and international institutions, whereas the situation today is different; the majority of debt is no longer owed to countries but has taken the form of bonds and treasury bills held by a diverse group of investors, including companies and financial institutions.” She added: “In the past, the Paris Club played a significant role in restructuring debt, whereas today Egypt’s debt to countries represents approximately 13 to 20 percent of total external debt.”
Debtor countries sometimes resort to rescheduling debts, including extending repayment periods or reducing interest rates. According to El-Shawarby, Washington “may intervene to exert pressure in that direction if it serves its interests, but there are concerns, especially since these debts are linked to the International Monetary Fund. These amounts do not exceed about $12 billion of the total debt, and the IMF cannot restructure them except within a new package of reforms, which are often contractionary due to currency devaluation, subsidy cuts, and interest rate hikes.”
Economist Dr. Mohamed Anis shares the same view, stressing that “the composition of Egypt’s external debt is fundamentally different from what it was after the Gulf War, which affects the ability to deal with it, whether through cancellation or restructuring.”
Anis added to Alhurra that “the idea of debt write-off is primarily linked to the size of bilateral debt—meaning debt owed to specific countries such as Britain, France, or the United States—where the decision is largely political and may include reducing or canceling the debt. This was the model that occurred after the Kuwait war, when bilateral debt made up about 60 percent of total external debt.”
Positive Aspects
Despite external debt, there are positive aspects highlighted by Khoury, including improved growth to 4.4 percent in fiscal year 2024/2025, and a decline in inflation to 11.9 percent in January 2026, along with a primary budget surplus of 3.5 percent of GDP in 2024/2025, according to the International Monetary Fund.
For her part, El-Shawarby emphasized that “Egypt has always been committed to repaying its debts, even amid global economic conditions that negatively affect foreign currency inflows, which sometimes leads to resorting to new borrowing to meet existing obligations.”
Khoury believes that “Egypt’s financial stability depends on three factors: continued Gulf support, foreign investors’ confidence in local debt instruments (about $30 billion), and avoiding new external shocks.” He considers that the most realistic solution instead of “debt relief” is “silent swaps by converting Gulf deposits into direct investments, such as the Ras El Hekma project model, or using World Bank tools to convert foreign currency debt into local currency or lower-risk debt instruments, similar to experiences in the Philippines, Indonesia, and Colombia.”
The Egyptian debt file reflects complexities that make a comprehensive debt relief scenario unlikely at present, according to experts, which necessitates searching for other, more realistic solutions.
The article is a translation of the original Arabic.
