The government is preparing to unveil a new and comprehensive debt-management strategy in December. The plan, according to the minister of finance, aims to reduce the country’s public debt-to-GDP ratio to below 75 per cent within three years. It also targets lengthening the average maturity of public debt to five years and reducing debt-servicing costs to about seven per cent of GDP over the same period.
The announcement follows encouraging projections by the International Monetary Fund (IMF). In its latest Fiscal Monitor report, the fund estimated that Egypt’s gross general government debt would gradually decline from 90.9 per cent of GDP in fiscal year 2023-24 to 86.8 per cent in 2024-25 and to 72.5 per cent by 2029-30. The IMF commended Egypt’s fiscal discipline, noting that a combination of spending restraint and improved revenue mobilisation has helped achieve a primary surplus.
National data using a slightly narrower definition of public debt and measured on a calendar-year basis put the ratio somewhat lower at around 83 per cent in 2024. The difference stems mainly from timing conventions and coverage: the IMF includes all general government obligations, while national figures typically refer to the budget sector only. Both sets of numbers, however, point to a downward path.
Yet, behind these promising figures lies a more complex reality. The IMF itself warned that Egypt’s debt-service burden remains substantial, with interest payments alone consuming nearly three-quarters of government revenues. This, it said, significantly limits the fiscal space available for development spending and social priorities. The tension between apparent improvements in headline indicators and persistent structural risks lies at the heart of Egypt’s debt challenge.
The debt-to-GDP ratio is often treated as the primary indicator of fiscal health. It is simple to communicate, easy to compare across countries, and widely used by analysts and policymakers. However, it provides only a partial view. While it relates the stock of debt to the size of the economy, it says little about the government’s actual capacity to service that debt or about its revenue generation, liquidity position, or exposure to exchange-rate and interest-rate risks.
More importantly, the ratio can decline even while the absolute amount of debt continues to rise. If GDP grows faster than the debt stock, or if inflation inflates nominal GDP, the ratio may improve on paper even as total borrowing increases. This can be deceptive. A government might take comfort in a declining ratio and delay necessary fiscal corrections, for example. The result is often a slow deterioration in debt quality and repayment capacity. When the underlying problem eventually surfaces, corrective action becomes more difficult and costly.
Such reliance on a single indicator can therefore create a false sense of progress. The debt-to-GDP ratio may decline, while the debt itself continues to grow, obscuring vulnerabilities beneath the surface. When governments misread this signal, they risk treating the debt issue with less urgency than it deserves, postponing essential reforms and aggravating the problem over time.
In order to judge whether public debt is truly sustainable, economists and institutions such as the IMF and World Bank use a wider set of indicators grouped into four main categories: solvency, liquidity, structure, and vulnerability to shocks.
Solvency indicators assess whether the government can generate enough income over time to service its debt. They include the debt-to-revenue ratio, which relates the debt stock to the government’s actual income, and the interest payments-to-revenue ratio, which measures how much of the government’s revenues are absorbed by interest obligations. A sustained primary surplus, measured before interest costs, is essential to stabilising or reducing debt levels.
Liquidity indicators capture short-term refinancing pressures. Chief among them is the ratio of gross financing needs to GDP, defined as the sum of the fiscal deficit and maturing debt. The IMF’s benchmark for emerging economies is around 15 per cent of GDP. Egypt’s gross financing needs, by contrast, have ranged between 30 and 37 per cent of GDP in recent years. This indicates heightened rollover and liquidity risks.
Structural indicators reflect the composition and quality of the debt. A high share of foreign-currency or short-term debt increases exposure to market volatility and currency depreciation. By contrast, longer maturities and a higher proportion of fixed-rate and domestically held debt strengthen resilience.
Finally, vulnerability indicators test how debt dynamics would respond to adverse shocks, slower growth, higher interest rates, or a weaker exchange rate.
By these broader measures, Egypt’s debt position shows both progress and fragility. The debt-to-GDP ratio of about 83 per cent in 2024 is high but not excessive by emerging market standards. However, with financing needs equivalent to one third of GDP and the fact that interest payments are almost equal to 70 per cent of total government revenues, there are constraints on public investment and social spending
External debt, estimated at about 44 per cent of GDP, adds another layer of risk. A considerable portion is denominated in foreign currency, which means that every depreciation of the Egyptian pound raises the local-currency value of external obligations.
The IMF’s debt sustainability framework captures these factors. Its analysis classifies Egypt’s public debt as “sustainable but subject to high risks”. This cautious phrasing reflects both a recognition of recent fiscal efforts and an awareness of ongoing challenges. Egypt’s debt remains serviceable under current assumptions, but sustainability depends critically on continued fiscal consolidation, stable access to external financing, and progress in structural reforms that expand the revenue base and enhance productivity.
Given this complexity, why do governments, in Egypt and elsewhere, continue to focus almost exclusively on the debt-to-GDP ratio? One answer is that this ratio is easily understood by the public and readily comparable across countries.
Moreover, acknowledging fiscal stress carries psychological costs. Publicising less favourable debt indicators may unsettle markets or weaken public confidence. At the same time, data limitations play a role. Information on debt-servicing, contingent liabilities, or off-budget borrowing is often incomplete or delayed, making the debt-to-GDP ratio the only timely and consistently available indicator.
Nevertheless, such selectivity carries risks of its own. Relying on a single, simplistic measure can mask emerging dangers and delay timely corrective action. A more credible and confidence-enhancing approach would be to publish a comprehensive public-debt dashboard that includes solvency, liquidity, and structural indicators alongside the debt-to-GDP ratio.
Debt safety is not about a single ratio but about resilience, which is the system’s capacity to withstand higher interest rates, slower growth, or exchange-rate volatility without sliding into crisis.
The forthcoming debt-management strategy offers an opportunity not only to lower debt levels but also to change the way debt is discussed. By embracing transparency and a multi-dimensional approach, Egypt can foster a more informed public debate, reinforce trust, and ensure that fiscal sustainability becomes a shared national priority.
*The writer is a banking consultant.
* A version of this article appears in print in the 20 November, 2025 edition of Al-Ahram Weekly
Short link: