CBE: External Debt Witnesses Largest Historical Decline

A high-ranking official at the Central Bank revealed that Egypt’s external debt declined to record 153.86 billion US dollars at the end of May 2024, compared to 168.03 billion US dollars at the end of December 2023, a decrease of 14.17 billion dollars, at a rate estimated at approximately 8.43%, indicating that this decline during the five-month period is considered the largest in the history of Egypt’s external debt.

The source pointed out that, in parallel with the significant decline in Egypt’s external debt levels, the Central Bank’s net foreign reserves recorded their highest levels at a value of $46.38 billion in June 2024, an increase of $13.26 billion since August 2022.

The source added that the current net foreign reserves balance covers about 7.9 months of the value of the country’s imports, a period that greatly exceeds internationally adopted standards as safe levels.

The source highlighted that there was tremendous growth in foreign exchange flows to the local market, an increase of about 200%, including an increase of more than 100% in remittances from Egyptians abroad compared to their levels before unifying the exchange rate.

The source said that the strong rise in currency flows contributed to eliminating the net foreign assets deficit of the Central Bank to record a surplus of $10.3 billion in June 2024, compared to a deficit of $11.4 billion in January 2024.

The net foreign assets of banks also improved to record $4.6 billion in May 2024. Compared to negative $17.6 billion in the same month last year.

The source pointed out that monetary policy decisions since August 2022 have succeeded in controlling inflation rates and putting it on a downward path, registering a significant slowdown to reach the level of 27.5% in June 2024, which is the lowest rate since February 2023, which contributes greatly to stabilizing prices locally and reducing inflationary pressures.

This led to restoring investors’ confidence in the local currency, in addition to the business and investment environment for the Egyptian economy.

At the level of external indicators, the source at the Central Bank confirmed that there was a significant improvement in the yield curve on Egypt’s Eurobond maturing January 2027, as it declined from 22.86% in October 2023 to reach the level of 9.2% in June 2024, with a decline of 13%, which contributes to reducing the cost of borrowing from international markets when needed and demonstrating the confidence of international investors in the reform measures.

The 1-year credit default swap contracts also improved by about 2,333 basis points between May 2023 and June 2024 to reach 346.3 basis points, indicating a decline in the risks of the Egyptian state’s debt instruments and an increase in confidence on the part of global markets in the ability of the local economy to fulfill international obligations.

Also there was a positive change of the credit rating agencies’ sentiment for the Egyptian economy and adjustment of their future expectations after unifying the exchange rate in March 2024.