Egypt’s debt repayment, fueled by a dip in inflation, has been lauded as a significant milestone by the country’s Prime Minister, Mostafa Madbouly.
- Egypt’s Prime Minister announced the country’s economic recovery and reduced economic challenges.
- Inflation rates have experienced a consistent decrease since 2023, indicating economic stabilization.
- External debt policies and financial assistance aided Egypt’s recovery, bolstered by UAE investments.
- Currency devaluation and high-interest rates were strategic steps for economic restructuring.
The Egyptian Prime Minister recently asserted that Egypt’s nagging economic challenges, particularly concerning debt repayment, are now a thing of the past.
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Egypt has faced one of the most severe economic downturns in its recent history, necessitating the acquisition of loans to address its fiscal deficits.
Mostafa Madbouly relayed that “the worst has passed” as it relates to the accumulation of external debt intended to resuscitate its economy.
The country’s economic recovery was underscored by the decline in its inflation. Last month, Egypt’s inflation level fell to 12%, down from 13.9% the month prior.
This decline, fueled by its economic policies, has been consistent since the year began, with a noticeable month-on-month change in February, when the inflation rate came in at 12.8% compared to 24% in January, marking its lowest level since 2022.
In 2024, officials let the country’s currency (the Egyptian pound) fall by more than 35% against the dollar and raised interest rates to a record high in March to ensure outside finances.
This policy, made possible by a significant investment from the United Arab Emirates, enabled the country to more than double its International Monetary Fund loan program as part of a massive global rescue totaling $57 billion.
Between 2022 and 2024, Egypt faced some of its most intense inflationary pressures, which peaked at 38% in September 2023, before experiencing some relief.
Decline in Egypt’s debt
As seen in the National News, Mr Madbouly noted that the 2024–2025 fiscal year saw a dip in the external debt to GDP ratio to 85%.
The government is working to reduce the debt-to-GDP ratio from a peak of almost 97% for the fiscal year 2023–2024 to 80% next year, the Prime Minister explained.
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He highlighted the fact that lower interest rates were crucial to the repayment of debts, which the government did not have in its purview, and was not entirely in the hands of the country’s central bank’s monetary policy committee.
Two weeks ago, the bank lowered its overnight lending rate by 200 basis points, which was the most recent drop.
In May, rates were lowered by 100 basis points, following a 200 basis point cut in April.
