• Egypt plans to finalize a new debt-swap agreement with European partners before the end of 2025.
• The deal aims to convert part of Egypt’s external debt into financing for development projects in water, energy, and climate sectors.
• The country, under an IMF program, seeks to ease fiscal pressure amid inflation, currency depreciation, and falling Suez Canal revenues.

Egypt plans to conclude a new debt-swap deal with its European partners before the end of 2025, Planning and International Cooperation Minister Rania al-Mashat said on the sidelines of the IMF and World Bank Annual Meetings in Washington.

The operation will restructure part of Egypt’s external debt by converting it into funding for priority development projects, al-Mashat said. The government aims to reduce debt-servicing costs while channeling resources into sectors such as water management, renewable energy, and climate adaptation.

“Responsible Debt Management Tool”

“Debt swaps are a responsible instrument for managing financial obligations,” al-Mashat said. “They help relieve fiscal pressure and attract resources aligned with our sustainable development goals,” she added.

The minister did not disclose the size of the operation but noted that additional agreements are being planned for 2026. Since the 1990s, Egypt has executed similar swaps with Germany and Italy, totaling close to $1 billion, allowing debt repayments to be redirected toward development projects instead of direct payments to creditors.

Economic Pressures Mount

Egypt is implementing a three-year IMF program to restore macroeconomic stability amid a sharp currency depreciation and soaring inflation. The government has intensified efforts to secure foreign-currency inflows and boost investor confidence.

Revenues from the Suez Canal, a major source of hard currency, have declined in recent months due to geopolitical tensions in the Red Sea. Attacks on commercial vessels have diverted traffic away from the waterway, cutting transit revenue.

Al-Mashat said she expects the situation to improve by 2026, with the canal resuming a positive contribution to economic growth.

By pursuing new debt-swap arrangements, Cairo seeks to demonstrate its commitment to fiscal reforms and sustainable debt management. The upcoming deal, backed by several European partners, is expected to be completed by December 2025 and could serve as a template for future financing mechanisms aimed at widening Egypt’s fiscal space.

This article was initially published in French by Fiacre E. Kakpo

Adapted in English by Ange Jason Quenum