Egypt says Suez Canal will not be used to settle government debt

CAIRO – Egypt has ruled out any move to swap, mortgage or transfer ownership of the Suez Canal in exchange for debt relief, after a proposal to use state assets to reduce government liabilities triggered speculation over the future of the strategic waterway.

The Cabinet said on Sunday that the canal was not part of any plan to settle Egypt’s domestic debt and rejected suggestions that its ownership could be transferred to the Central Bank of Egypt.

The statement followed comments by Hassan Heikal, an adviser to Prime Minister Mostafa Madbouly, who had suggested that stakes in state-owned companies or potentially the Suez Canal could be used to offset part of the government’s domestic debt, with corresponding liabilities transferred to the central bank.

The Cabinet described the proposal as a “purely personal view” that did not represent government policy, saying the idea was “unacceptable and will not happen.”

It was particularly categorical about the canal, saying there were no plans under any circumstances to swap, mortgage or transfer its ownership.

The government described the Suez Canal as a strategic public utility directly linked to Egypt’s national security and sovereignty, as well as a central pillar of the country’s economy and global trade.

The clarification came after claims circulated online that Egypt was considering transferring ownership of the canal to the central bank as part of a debt-settlement arrangement.

The Cabinet said the broader concept of exchanging state assets for debt had previously been examined as part of government reviews of ways to manage public debt and reduce the cost of servicing it. But it stressed that simply moving assets and liabilities between public institutions would not reduce the state’s overall obligations.

Managing public debt instead requires addressing its structure, servicing costs and domestic liquidity, while taking into account the effects on both fiscal and monetary policy, the government said.

The debate over state assets followed a debt settlement announced last week involving Egypt’s National Media Authority, formerly known as Maspero.

The government said on Thursday that it had reached an agreement to settle 88.3 billion Egyptian pounds ($1.77 billion) owed by the authority to the National Investment Bank. It did not disclose the terms of the settlement or the assets involved.

Heikal cited that arrangement as a possible model for dealing with other domestic government liabilities, suggesting that assets could be transferred between state entities alongside the liabilities associated with them.

The Cabinet, however, said Egypt’s strategy for reducing public debt was based on broader improvements to public finances rather than simply transferring assets from one government institution to another.

Those measures include achieving sustainable primary budget surpluses, increasing state revenues, improving the efficiency of public spending, extending debt maturities, reducing servicing costs and maximising returns from state-owned assets.

The government has been seeking to reduce the pressure created by high public debt and the cost of servicing it while also pursuing a wider programme to improve the performance and value of state-owned assets.

The Suez Canal occupies a particularly sensitive place in Egypt’s economic and political landscape. The waterway is one of the country’s most important sources of foreign currency and a crucial global shipping route connecting the Mediterranean with the Red Sea.

Its strategic importance has also made any suggestion of changing its ownership politically sensitive, prompting the Cabinet to frame the canal not simply as a revenue-generating asset but as an element of national sovereignty and security.