Egypt will settle $1.3 billion in arrears to international oil companies by June, the petroleum ministry said on Saturday, accelerating its previous timetable for repayments.
Egypt had accumulated about $6.1 billion in arrears to foreign oil companies by June 30, 2024.
The accumulation is due to a prolonged foreign currency shortage that delayed payments and weighed on investment and gas output.
What the report is saying
The report notes that the shortage has since eased, though some companies have said that arrears have once again been accumulating.
Under its prior timetable, announced in January this year, the government had expected to still have arrears of about $1.2 billion by June.
Clearing the debt may encourage foreign oil and gas companies to resume drilling, which would boost local production that has been steadily falling since peaking in 2021.
More local production would help the North African nation reduce its energy imports.
More insights
Egypt’s energy import bill has more than doubled since the outbreak of the United States–Israeli war with Iran.
- The government is considering asking employees to work remotely and closing shops by 9 p.m. (1900 GMT) five days a week to cut energy consumption.
- According to a recent note by the Institute of International Finance, the additional cost of oil could lead to an increase in expenditure of between 0.2% and 0.55% of the country’s Gross Domestic Product.
This is coming at a time when the country’s economy is barely recovering from successive shocks.
What you should know
In 2024, Egypt started paying off debts it owes to foreign oil and gas companies operating in the country, having set aside $1.5 billion for the payments.
- A cabinet statement revealed that the ongoing payments, which had just resumed, accounted for 20% of the arrears owed to companies.
- It stated that the rest of the arrears would be paid off through a scheduled plan.
- Egypt started accumulating arrears to companies and contractors during a prolonged period of foreign currency shortage.
- The severe shortage had eased earlier after Egypt announced a record deal with the UAE, devalued its currency, and received aid while expanding its programme with the International Monetary Fund.
A source close to the companies told Reuters that Egypt had informed one of the companies that it would start paying back up to $1.5 billion of the total arrears.
