Egypt’s macroeconomic policy framework and will assist in lowering the cost of financing in the future. However, despite the strong fiscal consolidation effort to date, the total general government debt (both domestic and external) has continued to climb and is now reaching close to 100 percent of GDP (IMF 2017). As previously noted, the devaluation of the Egyptian pound alongside the government’s increasing recourse to external debt over the past two years (to diversify its sources of funding and ease the pressure on the domestic debt market) have contributed to the deterioration in the debt to GDP ratio as well as the rising cost of debt servicing. The anticipated shift in the near-term to a primary budget surplus – as a result of fiscal reforms – combined with higher growth is expected to rectify the currently unfavorable debt dynamics.

58. Further, government access to finance can potentially be obtained from multiple sources – whether domestic or external, private or public (including public concessional lending in some cases). It should be noted that the Egyptian government obtains the bulk of its deficit financing through the issuance of Egyptian pound-denominated Treasury bills as well as bonds that are purchased by domestic banks. In response to the economic reforms as well as the positive impact of the gradually improving public finances on market confidence, foreign investors have recently returned to the domestic debt market: at the closing of FY 2017, foreign investment in government paper reached the equivalent of $13 billion – up sharply from a mere $1 billion at the beginning of the year. However, while this influx of foreign capital serves to ease domestic liquidity and financing constraints, it also carries the risk of a sudden reversal in response to any shocks. With that being said, producing and implementing measures to attract more stable and developmentoriented FDI inflows can better accomplish the government’s longer-term goals.

59. The Egyptian government has garnered significant funding from official multilateral (the IMF, World Bank, African Development Bank and other IFIs) and bilateral sources (primarily the GCC countries). Returning to data selected to assess availability of financing for development, we observe that Net Official Development Assistance (ODA) as a percent of GNI is currently below the levels of Egypt’s peer countries. Further shown in Table 4, the cross-country patterns suggest that net ODA will continue to decrease without significantly changing per capita terms. In the case of Egypt, such a projected reduction will lead to a decrease from the low level of 1.2 percent of GNI to about 0.6 percent by 2030. As the role of concessional financing can be expected to further decline, the challenge for Egypt will be to attract other forms of foreign financing such as nonconcessional flows of MDBs and private financiers, e.g. in the form of direct foreign investment. These may feature co-financing of development projects that use various risk mitigating instruments like blended finance or guarantees in collaboration with IFIs to increase resource flows for development. Extensive efforts have been made by the Ministry of International Cooperation to forge strong partnerships with an array of multilateral organizations; these strategic steps to bolster relations should facilitate continuing financial and technical support from such institutions (Ministry of International Cooperation 2015).

60. In addition, the Egyptian government has tapped the international capital markets with three recent bond offerings. For its first international issuance in over five years, the government raised $1.5 billion in 10-year bonds in June 2015; this was followed by two rounds of sovereign bond issuances in January 2017 ($4 billion) and May 2017 ($3 billion).

61. As previously noted, external debt has rapidly increased over the last two years following the large increase in government borrowings from external official sources and the international 22