Egypt is preparing to clear 20% of the outstanding debts owed to foreign oil and gas companies operating within its borders by June, according to reports.

The dues, which accumulate from activities like oil and gas exploration, drilling, and extraction conducted at the Egyptian General Petroleum Corporation (EGPC), amount to roughly $4.5 billion, based on data from the International Monetary Fund (IMF).

In March, Egypt paid $1.5 billion towards these dues, an amount estimated by Bloomberg to cover 20% of the total outstanding amount. Before geopolitical tensions erupted in October, the Arab world’s most populous nation was already grappling with its worst economic crisis in decades and a shortage of foreign exchange. 

This conflict threatened to disrupt both trade and tourism, exacerbating the country’s challenges. Furthermore, revenues from the Suez Canal transit were reduced as leading major shipping firms bypassed the Red Sea.

The country has faced similar financial strains in the past, notably after the 2011 uprising, when debts to foreign oil companies soared to $6.3 billion. It took several years for the country to clear this debt.

Additionally, the country’s gas production has declined to 5.5 billion cubic feet per day, with the minister attributing this decrease to natural declines in fields. Reports indicate that this level is the lowest in years. As Egypt primarily exports its surplus gas, mainly to Europe as LNG, it may need to halt shipments again in the summer to meet domestic demand.

The economy in Egypt
Earlier this year, the country secured $35 billion from the UAE to develop the coastal city of Ras El Hekma in a landmark deal. It also received commitments for $8 billion each from the International Monetary Fund and the EU over four years, and $6 billion from the World Bank.

Reports have said that there is an imperative for comprehensive reforms, particularly through reducing the state’s involvement in the economy and fostering greater private-sector engagement.

Concerns have also arisen regarding the government’s reliance on debt issuance to address budget shortfalls, rather than implementing transformative measures.

A recent agricultural initiative launched by the government drew criticism for its exclusion of the private sector. Nevertheless, there have been encouraging developments, such as Fitch Ratings revising its outlook on Egypt’s four largest banks to positive in early May, following a similar revision for the country’s overall outlook.

However, the rating agency cautioned that Egypt remains heavily indebted, with government debt projected to reach 93% of GDP by June. While the stabilisation of its currency and replenishing of foreign reserves have provided some relief, analysts underscore the urgent need for concerted efforts to construct a more resilient and sustainable economy.