After a year of upbeat government messaging about stabilisation and renewed investor confidence, Egypt’s debt trajectory has once again turned upwards.
The country’s external obligations climbed by $2.48 billion in the third quarter of 2025 to just over $163 billion – the highest level in seven quarters, according to the World Bank’s International Debt Report's December update.
It has drawn particular attention because it comes after months of officials emphasising improved fiscal discipline, while avoiding detailed disclosures of total foreign debt. The new figures provide the clearest picture yet of the scale of Egypt’s liabilities and the urgency facing policymakers in 2026.
Reality check
While government and central bank debt edged slightly lower, banking sector obligations increased by $1.3 billion, and “other sectors” added another $2.43 billion. Nearly two-thirds of the total is denominated in US dollars, leaving Egypt vulnerable to renewed currency pressure.
According to the World Bank’s repayment schedule, about $28 billion falls due in the first quarter of 2026, part of $66.6 billion maturing within 12 months of September 2025. The timetable leaves little margin for policy missteps or delays in investment inflows.
The government says it will unveil a comprehensive debt-management strategy by the end of the month. It will aim to ease servicing costs and gradually lower the public debt ratio to around 68 per cent of GDP by 2030.
However, economists have repeatedly raised doubts as to whether this is doable in light of the state’s debt trajectory and the economy’s volatility to external shocks, as illustrated by Covid-19, the Russia-Ukraine war and the war in Gaza.
IMF reviews reinforce warnings
Earlier on Thursday, the IMF Executive Board completed its long-awaited fifth and sixth reviews of Egypt’s Extended Fund Facility and its first under the Resilience and Sustainability Facility, confirming that “stabilisation policies have taken hold” but urging faster action on deep-rooted reforms.
The reviews, which were meant to be completed by November 2025, were repeatedly postponed due to delays in implementation of key reforms by the Egyptian government.
In its report after the meeting, the IMF noted that inflation had fallen to 11.9 per cent in January and growth had recovered to 4.4 per cent, supported by tight fiscal and monetary policy, a flexible exchange rate, and stronger external inflows.
Gross reserves rose to about $59 billion, buoyed by tourism and remittances, it said.
However, the report warned that progress on structural reforms remains uneven, highlighting slow divestment of state assets and limited fiscal space due to high debt and large financing needs.
It also called for “full implementation of the debt-management strategy”, tighter oversight of off-budget state entities and faster privatisation. The recommendations also included reducing exemptions on taxes.
Slow but steady
Meanwhile, at home, Egyptian experts have differing views on the fate of the country’s economy.
Economist Moustafa Badra said the debt position, though “striking,” must be seen alongside improving fundamentals. He cited falling inflation, stronger tax revenue and a rising primary surplus as signs that the economy is recovering from successive global shocks.
Egypt recorded a 3.5 per cent primary surplus in fiscal 2024/25 and expects up to 4.5 per cent this year, according to Finance Ministry data.
“The economy is undeniably in a better place now than it was before the reform programme,” Mr Badra told The National.
“Crises take time to recover from, and the improvement in headline indicators is real, even if households haven’t yet felt a full return to stability.”
Tourism arrivals reached 19 million in 2025, up 21 per cent year-on-year, and non-oil exports rose 18 per cent to $44 billion. These inflows, together with tighter import controls, helped narrow the trade deficit and strengthen Egypt’s reserves.
Yet even as the IMF praised the government’s stabilisation record, it underscored the need to translate macro gains into durable, private-sector-led growth, a point Mr Badra concedes.
“Lasting improvement will depend on sustaining investment and job creation rather than relying on state-driven projects,” he said.
Reform fatigue and demographic weight
Concerns continue to be raised about the state of the economy once the IMF ends its programme in Egypt at the end of the year and is no longer overseeing the state’s activities.
Though it was slated to end in October, the fund has pushed its departure date to December, its executive board said on Thursday.
This was highlighted in televised statements last month by former deputy prime minister Ziad Bahaa Eldin, who described 2026 as “a crossroads year” for the Egyptian economy.
He warned that beneath improving metrics lie structural weaknesses that could resurface once IMF oversight tapers off.
Mr Bahaa Eldin credited the early reform rounds with restoring fiscal control but argued that the state still dominates too many commercial sectors, crowding out competition and dampening transparency, points echoed by the IMF’s own call for a “reduced state footprint” and a “more level playing field”.
“We need a plan that lets the government truly co-operate with the private sector, not compete with it,” he said. “And when it competes with it, that needs to be co-ordinated also.”
Both economists see demographics as a persistent drag. Egypt’s population has surged from 80 million to roughly 110 million in a decade, plus about 10 million refugees.
“Even with success on paper, the bill keeps growing,” Mr Badra noted. “Each wave of new births demands education, health care and jobs.”
Internal strain
The January reinstatement of a 38.5 per cent import charge on mobile phones symbolises a drive to expand non-oil revenue and digital tax enforcement, raising annual receipts by more than 30 per cent since 2023.
The IMF welcomed this step but urged further broadening of the tax base by cutting exemptions, especially under VAT.
The rise in taxes has been repeatedly denounced by Egyptians on social media and in parliament, most of whom continue to endure high costs of living.
Despite improved indicators, the IMF and local analysts caution that regional volatility could quickly upend progress.
“If the US were to attack Iran as [US President Donald] Trump has threatened, then the situation would veer into free fall again,” Mr Badra told The National.
Such a scenario, he added, would immediately push up global energy prices, restrict trade through the Suez Canal and drive down tourism, drying up the country’s vital foreign currency sources.
