The Egyptian Ministry of Finance is moving towards implementing a comprehensive plan to restructure local debt instruments during the fiscal year 2026-2027. The ministry aims to increase long-term treasury bond issuances while reducing dependence on short-term treasury bills. This initiative is intended to extend the average maturity of debt and improve the structure of maturities, thereby alleviating financial pressures on the public budget.
According to a government document reviewed by "Al-Borsa," the ministry aims to double treasury bond issuances to reach 2.5 trillion pounds in the upcoming fiscal year, compared to approximately 929 billion pounds in the current fiscal year. It is expected that the contribution of bonds will rise to 74% of total local issuances, while it currently stands at only 29%.
Event Details
Conversely, the government plans to reduce treasury bill issuances by approximately 60%, bringing them down to 916 billion pounds by the end of June 2027, compared to 2.2 trillion pounds projected by the end of the current fiscal year. This trend will reduce the share of treasury bills to 26% of total local debt instruments, down from 71% currently.
Government sources confirmed that this step is part of a plan aimed at improving the structure of maturities and extending the average maturity of local debt, which contributes to easing financial pressures on the public budget and reducing refinancing risks. The ministry also seeks to raise the share of local debt to 80% of the total debt of budgetary entities within three years.
Background & Context
Historically, Egypt has faced numerous challenges in managing public debt, with the debt-to-GDP ratio rising significantly in recent years. These plans come at a time when the government is striving for economic stability and improving the investment environment. Ahmed Kouchouk, the Minister of Finance, previously stated that the government aims to reduce the debt-to-GDP ratio to below 75% within three years.
The ministry also aims to extend the average maturity of debt to around 5 years and reduce its servicing cost to about 7% of GDP. These objectives indicate a strategic shift in public debt management, focusing on risk management rather than merely reducing costs.
Impact & Consequences
The government expects these steps to enhance the stability of the financial market and attract more investments. By extending maturities and diversifying the investor base, refinancing pressures can be alleviated, which strengthens the government's ability to face future economic challenges.
Moreover, increasing long-term bond issuances may enhance the attractiveness of government debt instruments to a broader range of investors, contributing to improved liquidity in the secondary market. These measures could also help improve Egypt's credit rating in the future.
Regional Significance
These steps are part of broader efforts to improve public debt management in Arab countries, many of which face similar challenges in managing their debts. Egypt's success in implementing this strategy could serve as a model for other countries in the region.
In conclusion, restructuring local debt represents a strategic step towards achieving greater economic stability, reflecting the government's commitment to improving financial resource management and fostering economic growth.