Governance of Egypt’s Public Debt Management

Governance of Public debt management is one of the most critical measures of long-term fiscal policy to maintain macroeconomic stability, through putting public debt on a sustainable trajectory. High economic growth rates do not necessarily guarantee the containment of rising public debt levels or their associated servicing costs. Consequently, sustainable economic growth cannot be achieved in isolation from public debt sustainability considerations. Public debt sustainability refers to a country’s capacity to meet its financial obligations—both principal and interest—without encountering financial distress or jeopardizing its solvency.

Therefore, developing an efficient public debt management strategy in close coordination with macroeconomic policies enhances the resilience and adaptability of the national economic structure. Such coordination is particularly important in light of escalating regional and global economic and political uncertainties.

In that context, the main pillars of Egypt’s Ministry of Finance's Medium-Term Fiscal Strategy are mainly, advancing the tax and customs system and boosting confidence in revenue collection among the business community and financiers, maintaining fiscal discipline and ensuring that fiscal policies contribute to supporting private sector-led and export-driven economic growth, implementing an integrated strategy to reduce public debt to less than 70% of GDP in the medium - term; and increasing fiscal space for spending on essential services such as health, education, and social protection. As the figure below highlights that Egyptian government targets to decrease the level of public debt as percent of GDP gradually from 83.80% in FY2024-2025 to 70% in FY 2028-2029.

Source: MTDS Ministry of Finance

Bearing in mind, the high levels of domestic and external public debt observed in many developing countries and emerging economies constitute a major challenge to achieving comprehensive and sustainable development. This challenge is particularly pronounced when economic growth rates are not aligned with real productivity gains, demographic dynamics, and the absorptive capacity of local markets. As a result, governments face increasing fiscal pressures that impose significant burdens on both current and future generations. Under such conditions, reliance on a medium-term public debt management strategy alone is insufficient to curb rising debt levels or ensure fiscal sustainability. There is an urgent need to establish robust governance mechanisms for public debt management strategies that promote fiscal discipline, rationalize public spending priorities, and stimulate both public and private investment. These measures are essential for reducing the intergenerational burden of public debt and for advancing the achievement and localization of the Sustainable Development Goals (SDGs).

Noteworthy, the key measures for improving governance of public debt management include mobilizing financing from private sector to meet government borrowing needs; minimizing borrowing costs through coordination between fiscal policy and monetary policy; and establishing explicit targets for the public debt-to-GDP ratio to ensure consistency with debt servicing capacity.

Additional measures include diversifying borrowing sources—encompassing governments, individuals, and resident and non-resident institutions—and setting explicit borrowing ceilings. Furthermore, both quantitative and qualitative indicators should be developed to monitor and assess risks embedded in the public debt structure. These risks should be mitigated, where feasible, through debt restructuring, while carefully accounting for the associated costs.

Particular attention should be paid to risks related to foreign currency-denominated debt, short-term maturities, and debt carrying subsidized interest rates. Effective cash management policies are also required to ensure timely fulfillment of financial obligations and to assess the impact of contingent liabilities on the government’s overall liquidity position. In parallel, the establishment of an efficient government securities market is essential for minimizing costs and risks over the medium and long term.

In this regard, three overarching principles merit particular emphasis. First, transparency and disclosure rules must be institutionalized to ensure effective accountability within the public debt management system and enhance its overall efficiency. Second, increasing both direct and indirect investment inflows is essential for expanding sovereign revenue capacity and widening fiscal space to finance SDG implementation. Third, improving a country’s creditworthiness and sovereign credit rating contributes to the development and efficiency of government securities markets, facilitates the diversification of borrowing sources, and enables access to financing on more favorable terms. This also provides a benchmark for the domestic private sector to access international capital markets at competitive rates, while mitigating the crowding-out effects on national savings and domestic investment.

Internationally, the International Monetary Fund (IMF) and the World Bank have issued comprehensive guidelines aimed at maintaining governance of public debt management. These guidelines are structured around several core pillars. The first is the legal framework, which establishes the principles and rules governing public debt, including the definition of debt, borrowing authority, and related legal provisions. The second pillar concerns the institutional and organizational framework, which clarifies the roles and responsibilities of all entities involved in public debt management and ensures effective coordination among them. The third pillar focuses on the quality of the public debt management strategy, particularly the adoption of a medium-term strategy that defines clear objectives, balances cost and risk considerations, and relies on quantitative analytical tools to evaluate alternative borrowing options. The fourth pillar emphasizes adherence to transparency and disclosure standards, ensuring the regular, accurate, and comprehensive publication of public debt data to facilitate informed evaluation of debt management performance.

In addition, several governance criteria are essential for enhancing the long-term effectiveness of medium-term public debt management strategies. Debt management objectives must be aligned with broader macroeconomic, fiscal, and monetary policy goals. Quantitative performance indicators and analytical tools should be integrated into strategy design to reflect the government’s cost–risk preferences and guide the optimal composition of the public debt portfolio. Strategies should also incorporate mechanisms for managing financial risks associated with public debt, including explicit contingent liabilities arising from government guarantees. In line with IMF and World Bank guidelines, governments must account for contingent obligations when projecting future borrowing requirements and allocate budgetary resources accordingly. The preparation and publication of an annual borrowing plan, consistent with the medium-term debt management strategy, are also critical for enhancing predictability and transparency in financing operations.

Finally, governments confronting escalating levels of public debt—both domestic and external—often resort to a range of short- and medium-term measures to safeguard economic resilience. These measures include strengthening legal frameworks by imposing statutory limits on total debt levels and clearly defining the conditions under which new borrowing may occur. Regulatory oversight can be enhanced through the establishment of independent bodies tasked with supervising and evaluating debt management strategies and ensuring their alignment with economic policy objectives and sustainable development goals. Institutional capacity-building, supported by comprehensive training programs for debt management personnel, is also essential. Moreover, accelerating digital transformation and investing in financial technology can significantly improve data collection, management, and analytical capabilities, thereby supporting evidence-based decision-making and transparency. Strengthening transparency and accountability through the public dissemination of clear and accessible debt data promotes informed public dialogue and trust. Regular engagement with citizens, policymakers, and investors further enhances accountability. Last but not least, enhanced cooperation with international financial institutions and participation in international debt restructuring initiatives provide access to technical assistance and financial support. The establishment of robust monitoring and evaluation frameworks, supported by clear and measurable performance indicators, is crucial for assessing progress and ensuring the effectiveness of public debt management reforms.