Egyptian businessman and banker Hassan Heikal’s proposal to swap state assets—including the Suez Canal—to settle debt, dubbed the “grand swap,” sparked widespread controversy. Political and economic figures warned the government against using such proposals to escape debt burdens, while political forces described it as a direct threat to Egyptian sovereignty.
Heikal said on Saturday that the state had cleared Maspero’s debt by exchanging it for assets, mostly land, and transferring the National Media Authority’s obligations to the National Investment Bank. Under the settlement, Maspero was left debt-free and able to direct resources to developing programming and content, while the bank received assets equivalent to its overdue claims.
Writing on X, Heikal argued that the mechanism could be extended to domestic public debt. The state and central bank would replace the parties involved in the Maspero settlement, using public-company holdings or other assets, such as the Suez Canal, to settle part of the domestic debt.
Heikal had raised the idea before. In a January lecture at Cairo University, he described creating a fund containing state assets and using them to exchange domestic debts after those debts were transferred to the central bank. In his view, high domestic debt obstructs the allocation of state resources to development.
He argues that reducing domestic public debt this way could expand government spending, particularly on universal health insurance and education, allowing citizens to experience the benefits of economic reform directly.
The proposal comes as loan and interest bills climb. Egypt’s external debt stood at approximately USD164.776 billion at the end of the third quarter of fiscal year 2025/26, according to Central Bank of Egypt reports. Domestic debt reached EGP11.057 trillion at the end of June 2025, up 3.5% from approximately EGP10.685 trillion in the preceding quarter, according to the latest figures published by the Planning, Economic Development and International Cooperation Ministry.
The government distances itself
As the controversy intensified, the government issued a clarification on Sunday morning, hours after the proposal. It said the ideas circulating were the proposer’s “entirely personal vision” and did not represent state policy or an approach adopted by the government.
The cabinet said relevant authorities had previously examined exchanging some public assets for domestic debt while considering ways to manage and reduce public debt and servicing costs. The assessment found the approach unsuitable, so it was not included among the government’s debt-management policies or mechanisms.
Transferring assets and debt between state bodies does not, by itself, reduce the state’s total obligations, it said. Addressing public debt requires dealing with its structure, servicing costs and domestic liquidity, considering monetary and fiscal implications, and preserving efficient public-asset management and sustainable returns.
The cabinet categorically stated that the Suez Canal is not part of any such arrangement. There are no government plans to exchange, mortgage or transfer its ownership for debt. It described the canal as a strategic public facility tied to national security and Egyptian sovereignty, as well as the national economy and global trade.
The National Media Authority’s settlement with the National Investment Bank was a financial and institutional treatment of a specific case, governed by the two bodies’ legal and financial circumstances and the nature of their assets and obligations. It could not be treated as a general model for managing state debt, the cabinet said.
The government said its debt-reduction plan includes improving fiscal indicators, sustaining primary surpluses, increasing state resources and spending efficiency, extending debt maturities and lowering servicing costs. It also aims to maximize returns on state assets through the State Ownership Policy, offering programs and private-sector partnerships.
The cabinet said experts and public figures remained welcome to propose economic ideas, but individual proposals must be distinguished from official state policies and positions announced by competent government bodies through official channels.
Heikal responded on X that he was “not an adviser to the prime minister.” He maintained the substance of his earlier proposal, arguing that economic challenges require “different and unconventional” solutions and that repeatedly proposing the same solutions without tangible results cannot produce real change.
He said the government had already applied the approach at Maspero: “The government implemented the swap at Maspero, so I’m not sure about the claim that it is ineffective, because it has already been applied.”
Explaining his proposed transfer of public-company assets from the Finance Ministry to the central bank, Heikal said some public-company holdings should move to the institution entrusted with foreign reserves, the banking system and deposits.
Following wider opposition, Heikal withdrew the Suez Canal specifically from his proposal on Sunday. If canal-related assets were sensitive, he said, other holdings and assets could be used. He retained the core swap idea.
“Intellectual bankruptcy”
Dr. Khaled El Shafei, economist and head of the Capital Center for Economic Studies and Research, describes the proposal as “intellectual bankruptcy.” He says it offers no real remedy for budget imbalances or domestic and external debt.
Speaking to Zawia3, El Shafei says the idea simply disposes of an asset to repay an existing debt, like a person mortgaging a home or selling land or a car to pay a bank. This does not sustainably solve public debt, he argues; it moves the crisis from financial liabilities to state-owned assets.
He questions the value of this approach when some countries’ debts are several times their GDP. High debt does not necessarily require mortgaging state assets, he says. Referring to the Suez Canal, through which approximately 10–15% of global trade passes, he asks what purpose mortgaging a strategic waterway would serve and whether its future consequences and obligations could be guaranteed.
Beyond economic considerations, treating the canal as an asset for debt settlement raises sovereignty concerns, El Shafei warns. Turning this strategic state asset into a repayment instrument could expose Egypt to risks whose future consequences cannot be assured.
He says the cabinet needed to clarify its position so Heikal’s proposal would not be mistaken for official policy. Calling it a personal view separates the opinions of figures or advisers associated with government from the government’s own position, preventing public confusion about who stands behind it.
The government’s denial is not necessarily an economic assessment of the proposal, he adds, but a clarification of responsibility for it. An economic opinion from a public figure or official does not automatically become government policy.
Since the beginning of the year, the government has said it has an integrated path to reduce public debt and servicing costs, targeting a debt ratio of 71–73% by the end of fiscal year 2026/27, supported by a stable medium-term budget deficit.
Its financial and economic tools include sustainable primary surpluses—revenue exceeding expenditure before debt interest—alongside higher resources, more efficient public spending, longer debt maturities and lower borrowing costs, reducing annual debt-service pressures.
The government also seeks higher returns through asset restructuring and management, public offerings and private-sector partnerships, commonly described as state divestment or asset sales. Fiscal policy aims gradually to improve the debt-to-GDP ratio through spending control, greater revenue and growth. Effectiveness, however, depends on sustainable primary surpluses, lower borrowing costs and revenue from real sources rather than accounting settlements or moving debt between state institutions.
The government is expected to repay USD6.3 billion in external debt this year: USD2.9 billion in Eurobonds and USD3.4 billion in external loans, according to the Finance Ministry’s annual borrowing strategy.
There is a fundamental difference between reducing debt and reducing its ratio to GDP. The ratio may fall if output grows faster than debt without the nominal debt value declining. An asset settlement may ease one government body’s obligations, but it does not necessarily lower the state’s total liabilities without real financial flows or an actual reduction in debt owed by the government.
A direct constitutional violation?
Talaat Khalil, a Conservative Party figure and former MP, calls the proposal “unconstitutional” and a flagrant violation of Article 43. That article commits the state to protecting, developing and preserving the Suez Canal as an international waterway it owns. He argues that the constitutional protection means it cannot be treated as an ordinary asset in financial settlements.
Khalil tells Zawia3 that the cabinet “did the right thing” by clarifying its position. But he says the proposer was more than a public figure: in Khalil’s account, he was an adviser to the prime minister, a claim Heikal denied. Khalil urges an end to “trial balloons” and testing public reactions on strategic state assets.
The Suez Canal must never be approached in debt arrangements, Khalil says. Mortgaging it or using it to settle debt would be extremely dangerous economically, politically and for security.
He describes it as a public facility and international waterway belonging to the Egyptian people. In his assessment, it cannot enter debt swaps or transfer to the central bank. Its proceeds go to the treasury, so using it as collateral or exchanging it for debt would create major economic and sovereign risks.
Khalil says he participated in discussions on the constitutional protection of the canal and requested a specific provision similar to that protecting the Nile. This ultimately became Article 43.
The Suez Canal Authority’s law allows development, revenue generation and partnerships within legal limits, he says. New financial structures, including special funds, should not separate canal resources from the treasury or divert them to other purposes. Calling the debt-settlement idea “extreme recklessness,” he argues that the canal’s strategic nature makes this a national-security and sovereignty issue as well as an economic one.
Khalil says clear economic and fiscal policies should address public debt rather than relinquishing strategic assets. Treating the canal as a debt-repayment instrument would cross a line, in his view.
Could the government adopt it later?
Political economy professor Dr. Karim El Omda tells Zawia3 that Heikal’s debt-for-assets idea has been raised before but is not implementable. It confuses financial dealings within state institutions with managing an entire country’s assets and resources.
Settling debts between two companies, a company and a ministry, or two government bodies is fundamentally different from managing Egypt’s debt as a whole, El Omda says. “Egypt is a state”: its assets cannot be treated like those of separate entities settling liabilities.
Unutilized assets ultimately belong to the people even when held by state companies or entities, he argues. They cannot be relinquished because of mistakes by current or former governments.
He also rejects transferring state assets to the central bank for debt settlement. Its nature and powers do not include owning or managing state assets in this way, he says. Its principal functions concern monetary policy, reserves, exchange rates, currency issuance and banking supervision.
Maspero’s settlement was a limited procedure tied to specific financial and institutional circumstances, El Omda says. Partial settlements can occur between government bodies, companies and state agencies, but they provide no basis for managing public debt on a broad scale.
Extending the approach would not be practical and could disrupt economic and asset management, he adds. There are no clear international examples establishing its success at the level of an entire state.
Focusing exclusively on domestic debt overlooks the more consequential problem of external debt, El Omda argues. Domestic debt has negative effects but can be addressed through economic and financial tools. External debt exerts greater pressure, particularly through servicing costs and its effects on foreign-currency resources and the pound’s exchange rate.
Much of Egypt’s economic difficulty is connected to external debt and the pound’s depreciation against the dollar, he says. Managing domestic debt matters but cannot alone address the core pressures.
Despite the government’s announcement of an approximately 12% reduction in the debt-to-GDP ratio over two years and the subsequent Standard & Poor’s credit-rating upgrade in October—the first in seven years—debt servicing remained the sharpest challenge. Official figures show it absorbed about 50% of total public expenditure and approximately 72% of total revenue in 2024/25, among the highest shares in peer countries.
The grand-swap debate exposes a broader dilemma: how can Egypt reduce accumulated debt without turning strategic assets into repayment instruments for obligations rooted in prolonged financial and economic imbalances?
While the government emphasizes primary surpluses, spending discipline, longer maturities, lower servicing costs and higher asset returns, experts interviewed by Zawia3 argue that using assets to repay debt does not address the roots of the crisis. It may instead move it from indebtedness to the loss of assets that generate future returns.
