The statement came based on a virtual meeting held by the IIF and attended by 100 speakers and participants to discuss the economic situation in Egypt.

According to the statement, this repayment resulted from the development deal of the Ras El-Hekma coastal zone signed with the UAE in February, including the conversion of $11 billion in Emirati deposits at the Central Bank of Egypt (CBE) into local currency investments, in addition to the repayment of $2 billion in Eurobond bonds.

During the meeting, international investors expressed their optimism regarding the prospects of the Egyptian economy, supported by the massive inflows from the Ras El-Hekma deal.

Investors said Egypt has a bold record of fiscal commitment and achievement of its financial targets, adding that the goal of reaching a primary surplus of 3.5 percent of GDP may be ambitious, especially if it is taken into account that one percent of this target will come from the proceeds of the government’s Initial Public Offering (IPO) Programme.

Egypt targets a budget’s primary surplus of 3.5 percent in the upcoming fiscal year (FY) 2024/2025, which starts 1 July,  compared to 2.5 percent estimated for the current FY2023/2024. The target for the coming fiscal year is the highest since the outbreak of the pandemic in 2020.

Egypt also plans to use 50 percent of the IPO proceeds to lower its high debt level which hit 98 percent of GDP in the FY2022/2023.

However, the attendees widely agreed that Egypt will achieve another year of primary surpluses in the budget, which will put the public debt trajectory on a downward path towards reducing debt to below 80 percent of GDP by June 2027.

As per the IIF’s statement, 50 percent of the Ras El-Hekma deal proceeds will be kept in the New Urban Communities Authority (NUCA) accounts for projects related to Ras El-Hekma.

The IIF expected that the fiscal tightening adopted by Egypt under its loan deal with the International Monetary Fund (IMF) would further reduce public debt, as it would achieve larger primary surpluses.

The attendees noted that the recent reforms made by the government have reduced off-budget spending, the source of most government spending.

Moreover, they expected the CBE to start cutting interest rates, allowing the government to reduce the interest bill it pays on debt, which has exceeded 100 percent of revenues.

The government has preferred to pay a high interest rate over the short term rather than committing to a higher interest rate in the long term. Therefore, as soon as interest rates are reduced and inflation declines, government debt interest is expected to decrease significantly, they explained.

Egypt’s annual headline and core inflation rates have decreased over the past three months (March-May).

Additionally, they said there is room to increase revenues in the near term, especially since the revenue-to-GDP ratio is modest at 15 percent of GDP.

Private sector investors and government officials agreed that inflation is trending towards a slowdown despite currency devaluation and administratively set price increases, as currency stability and a favourable base year effect offset the negative impact.

They also expected inflation to fall below 15 percent by February 2025 and estimated interest rate cuts to range between four and eight percent by June 2025.