Why financing costs still weigh on Egypt’s private sector
As debate intensifiesover the 40 billion Egyptian pounds ($784m) in liabilities linked to Mohamed El-Kheshen, chairman of Evergrow Fertilizers, the firm has moved to clarify its position. In a statement this week, Evergrow said its debt stood at 11.8 billion pounds in 2021. Since then, the burden has expanded, driven less by fresh borrowing than by the steep rise in interest rates that has accompanied Egypt’s recent monetary tightening.
If accurate, the company’s statement suggests this is far from an isolated case. Recent financial results point to a steady escalation in financing burdens across firms in multiple sectors, even as the Central Bank of Egypt (CBE) began cutting interest rates in the first half of 2025.
Earlier expectations that monetary easing would relieve corporate financing pressures now appear premature. The ongoing war involving Iran is pushing inflation back to the forefront—threatening to slow the pace of interest rate cuts in 2026.
Mounting debt under tightening conditions
In its latest statement, Evergrow attributed its worsening debt position to the rising US dollar exchange rate, which inflates the value of dollar-denominated liabilities. It also pointed to the succession of crises Egypt has faced in recent years, from the COVID-19 pandemic to regional wars.
The company further cited a sharp increase in borrowing costs: “Interest rates on dollar loans rose from 5.5% to 10.5%, while rates applied to loans in Egyptian pounds climbed from 8% to nearly 30%.” These figures capture how aggressive monetary tightening has deepened debt burdens across the corporate sector.
Higher interest rates place a disproportionate strain on businesses reliant on borrowing. Mostafa Shafie, head of financial research at Acumen Asset Management, told Al Manassa that most companies borrow at variable rates that have surged in recent years from around 10% to more than 30%.
The CBE began aggressively raising interest rates in 2022 to contain spiraling inflation. Lending rates peaked in March 2024 at 28.25%, sharply increasing financing costs. Recent disclosures reveal the scale of the pressure: Ezz Steel’s debt more than doubled in 2025 to reach 45.1 billion pounds (about $885 million), while Qalaa Holdings restructured 4.5 billion pounds (about $88 million) in 2024 to ease its burden.
Yet, as financial analyst Mostafa Amin of Prime Securities explained to Al Manassa, “The most pressing factor weighing on company performance remains the cost of financing, which reached 7.5 billion pounds during the first nine months of 2025; a figure that reflects a heavy strain on profitability structures.”
2025 results show persistent strain
Even as debt accumulates, financing expenses have continued to climb across companies in 2025 despite the Central Bank’s shift toward monetary easing beginning in April, when rates were cut by 7.25 percentage points.
Juhayna Food Industries offers a telling case. Its financing costs rose to 1.169 billion pounds (about $23 million) by the end of 2025, up from 596.4 million pounds (about $11.7 million) a year earlier.
Analysts following the company say higher interest payments were a key driver behind a 30.1% year-on-year drop in net profits, which fell to 1.9 billion pounds (about $37 million).
Amin noted that this decline was not primarily due to weak demand. Instead, it reflects the growing weight of financing and operating costs—even as sales performance remained relatively strong.
The company’s expansion strategy also collided with a tightening monetary environment. “Juhayna implemented capital expenditures of around 2.9 billion pounds during 2025, aimed at expanding its transport fleet, improving operational efficiency, upgrading factories and enhancing product quality.”
This pattern repeats across sectors. Talaat Moustafa Group, for example, saw financing expenses jump to 3.9 billion pounds (about $76 million) in 2025, up from 1.3 billion pounds (about $25 million) the previous year, yet it still managed to grow profits by 43%.
By contrast, Misr Fertilizers Production Company (MOPCO) saw financing expenses rise to 89.8 million pounds (about $1.76 million), compared with 52.4 million pounds (about $1.03 million) in 2024. It could not sustain profit growth, with earnings declining by roughly 25% over the same period.
“The monetary policy transmission mechanism is not operating efficiently,” said Alaa Ahmed, a macroeconomic analyst at Thndr Securities, pointing to the weak and delayed pass-through of policy rate cuts to actual borrowing costs.
She likened it to pressing the brakes of a car that does not stop immediately, monetary policy takes time to filter through to companies and households.
Limited defaults, but rising pressure
Despite mounting strain, higher interest rates have not yet triggered widespread corporate bankruptcies, according to banking expert Sahar El-Damaty. The impact of monetary tightening, which began in 2022, remains largely contained to isolated cases.
Non-performing loans in Egypt stand between 2% and 3% of total credit portfolios—a level she described as “normal” for the banking sector.
“Monetary tightening was not without cost, but it was necessary to avoid a far greater one,” she said, referring to the need to contain inflation across the broader economy.
On the delayed effects of easing, El-Damaty emphasized that the process is inherently gradual. “Interest rate cuts do not immediately translate into lower financing costs or increased economic activity, they take time.”
Still, Shafie argued that current interest rate levels remain burdensome. “Rates are still high compared to normal levels, which typically range between 7% and 8%, versus more than 20% currently prevailing in the market.”
Iran war threatens fragile easing
With the Strait of Hormuz effectively closed and global oil prices rising, inflationary pressures have returned with force, casting doubt on the sustainability of monetary easing.
Mina Refik, a financial analyst at Prime Securities, told Al Manassa that war-driven inflation could shape the Central Bank’s next decisions, whether to hold rates or raise them again.
The Central Bank’s lending rate currently stands at 20%, with a policy meeting scheduled for April 2 to decide the next move in light of the escalating conflict.
Yet the crisis may also open a narrow window for some businesses. Amin noted that a weaker Egyptian pound—accelerated by the war—could boost the competitiveness of exports, allowing exporting firms to partially offset rising financing costs.
Since the outbreak of the US-Israeli war on Iran in March 2026, the dollar has surged to record levels against the pound. This comes amid a rapid outflow of foreign portfolio investments and growing concern over the war’s impact on Egypt’s foreign currency revenues.
Much now hinges on how the war unfolds.
Alaa Ahmed expressed cautious hope that it will end quickly, allowing markets to regain some momentum. But she warned that a prolonged conflict could entrench a new wave of inflation, delaying further rate cuts and extending financial strain.
For Egypt’s private sector, the present moment feels suspended. Debt continues to swell, while relief remains just out of reach, leaving businesses caught between the cost of survival today and a stability that keeps slipping further into the distance.