Opinion...

Egypt’s economy: When infrastructure outpaces production



Two pairs of US hundred dollar and Egyptian hundred pound notes are held before a window showing the skyline of Egypt’s capital Cairo and the Nile river on January 16, 2023 [KHALED DESOUKI/AFP via Getty Images]

by Jasim Al-Azzawi

December 27, 2025 
Middle East Monitor.

The international debt of the government of Egypt was estimated at 161.2 billion US dollars in June 2025, while it spends almost half of its budget to meet this debt. But behind these alarming figures, a much scarier picture is looming. How did Egypt, which has designs to be a major player in the region, end up paying yesterday’s bills with its most prized possessions?

The problem, according to economist Dr Hassan El-Sady of Cairo University, is not just the amount they have borrowed. It is about the motivations for their borrowing.
The infrastructure paradox

Egypt has been moving at a feverish pace. Since 2014, it has been borrowing on a gigantic scale to finance infrastructure development projects, new capital, new cities, and major highways crisscrossing the Sahara. Numerous power stations have been operating beyond capacity, while real estate developments that may best be described as monumental have taken place.

Nevertheless, the unfortunate truth is that debt payments account for 47.4 per cent of the budget for 2024/2025, up from 37.4 per cent in the 2023/2024 budget. Unfortunately, infrastructure projects do not pay the bills; factories and farms do. For example, Egypt built roads before ensuring that the vehicles could transport the commodities to the market.

The economic reasoning is simple. Any power-producing station needs manufacturers to use its electricity and other countries to sell enough products to generate returns on its investment. Any seaport needs an induced hinterland to load its containers with products. Egypt invested in sectors that constitute supply bases, but very little in industries that require those supplies. And what did they get? There is low investment in sectors such as agriculture and industry, and electricity production and road capacity are underutilized.

The asset fire sale

When debt service represents half of your expenditures, difficult decisions are in order. Egypt’s foreign debt service for fiscal year 2023/2024 totaled $32.9 billion. In an attempt to finance its debt service obligations, Egypt turned to a process known as “debt-for-equity swaps” – selling shares in profitable publicly owned companies.

In this regard, take, for instance, the case of the Alexandria Container and Cargo Handling Company, considered one of the major players in Egypt’s port sector. The company posted revenues of EGP 8.37 billion with EBITDA of EGP 6.09 billion for FY 2025. It is precisely this kind of entity that no investor would be eager to sell. Nonetheless, in 2022, ADQ bought a 33 per cent stake in Alexandria Container Handling for $186 million, and now Abu Dhabi Ports will buy a controlling 32 per cent stake for $461.2 million.

This trend is seen in every sector. When a nation acquires funds for debt repayment by selling its income-yielding resources, this is not repackaging but a short-term financial solution.
The creditor’s advantage

Foreign investors are not building new factories in Egypt. Instead, they are buying already successful companies in Egypt. This is a crucial aspect. Greenfield investment adds capacity and jobs. Instead, they acquire an existing asset and change the ownership of the existing cash flow. What this means for Egypt is that this influx of dollars is only postponing the problem.

“The math doesn’t add up.” The Central Bank of Egypt has announced that the cost of debt servicing by 2025 would reach $22.46 billion. Meanwhile, revenues from the Suez Canal declined by 40 per cent in the first quarter of 2025, resulting in $7 billion in losses due to attacks by the Houthis. As you look around and see that the major dollar revenue streams are under pressure while debt servicing is increasing, selling the remaining profit-making units becomes a necessity, however painful.
The social deficit

However, these economic indicators only form one aspect of this issue. In its social protection scheme, it announced an increase in pensions for 13 million Egyptians by 15 per cent to EGP 74 billion, in addition to another 15 per cent increase in ‘Takaful and Karama’ pensions worth EGP 5.5 billion. These amounts are not mere figures; they symbolize the number of families affected by devaluation due to a loss of purchasing power.

The paradox of this situation is that Egypt has accumulated redundant capacities in almost all areas, including electricity, real estate, and even fish farms. Nevertheless, prices have skyrocketed rather than dropped. The only explanation for prices increasing while capacity is available but consumption decreases is that demand has fallen. There are capacities available, but funds are lacking to purchase them.

A path forward?

“The problem of Egypt is not exceptional,” but rather “it is certainly very instructive,” says Ambrose Evans Pritchard, columnist for The Daily Telegraph newspaper. Sri Lanka, which has dedicated 52 per cent of its budget to debt, defaulted on loans last year totaling $51 billion. Egypt, to date, has not defaulted on its loans thanks in part to aid from Gulf countries—the memoranda of understanding reached last year with the United Arab Emirates for an investment worth $35 billion in an investment project for the development of the mentioned coastal area named “Ras el-Hekma,” and an additional $22 billion from the International Monetary Fund, European Union, and World Bank.

However, the big question is: Will Egypt manage to shift from an infrastructure-oriented economy to a production-oriented economy before running out of exportable resources? Egypt needs investment in industry and agriculture, not investment in roads. Egypt needs export-oriented sectors, not high-priced residential areas.

The external debt/GDP ratio increased to 42.9 per cent in December 2024, while budgeted interest payments for the 2024/2025 budget year are estimated at EGP 1.83 trillion, about 11 per cent of GDP. This is quite manageable. But the truth is, other countries have recovered from worse. The time has come to turn the tide by placing greater emphasis on development drivers than on development symbols.

“The Egyptian economy,” Dr El-Sady believes, “may very well be living on borrowed time.” The problem lies not in the time itself, but in what will be done with it, how it will be invested, and the repercussions for the time of assets that could be tapped for the Egyptian economy. Every time a port facility changes hands in a sales transaction, every profitable business changes from Egyptian to foreign hands; it’s not a short-term injection of capital, but 30 years of lost economic activity.”

Infrastructure without production resembles a theatre without actors. It looks very handsome, costly to maintain, but empty.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.