Khaled Ali Writes: The Suez Canal Is Not an Entry in the Debt Ledger
Saturday 29/August/2026 - 07:28 PM
Khaled Ali
Mr. Hassan Heikal has once again put forward what he calls the “Grand Swap”: transferring ownership of the Suez Canal Authority from the Ministry of Finance to the Central Bank in exchange for wiping out a substantial portion of the domestic debt, valuing the Authority at approximately $200 billion.
In fairness, we should begin with the point on which we agree: Heikal is right that domestic debt and the cost of servicing its interest place genuine pressure on the state budget, and that draining state resources to service debt narrows the fiscal space available for development and public services. But agreeing on the diagnosis does not mean agreeing on the prescription. And it is here that I fundamentally disagree.
First: The Canal Is Not a Financial Asset
The fundamental point of disagreement lies in the attempt to arrive at a “fair value” for the Canal in the same way one might value a company or a hotel. What price can be placed on control over a unique geographical location connecting the Red Sea and the Mediterranean, through which, under normal conditions, approximately 12% of global trade passes? Some assets are measured by the cash flows they generate, while others confer upon the state something beyond money: strategic location, capability, and sovereignty. The Canal belongs to the latter category.
That is why the Constitution does not treat it as a state-owned company. Article 43 requires the State to protect, develop, and preserve it as an international waterway owned by the State. The proper question, therefore, is not whether it is worth $50 billion, $100 billion, or $200 billion, but rather: Should everything that can be assigned a monetary value be entered into a financial equation?
Second: The True Price of the Canal
Egyptians have paid the price of the Canal in blood more than once. Perhaps if Mr. Hassan Heikal were to read his father, Mr. Mohamed Hassanein Heikal’s compelling book Suez Files, the first volume of his celebrated four-part series The Thirty Years’ War, published by the Al-Ahram Center for Translation and Publishing in 1986, he would appreciate the scale of the catastrophe he is proposing.
Egypt’s historical record documents that approximately 120,000 Egyptians lost their lives during the years of construction (1859–1869), amid forced labor, epidemics, and water shortages.
Then came debt.
In 1875, under the pressure of the financial crisis, 176,602 shares, representing 44% of the company’s shares, were sold for approximately £3.98 million. Those shares entitled Egypt to approximately 31% of the profits, according to the official history of the Suez Canal Authority.
Ismail did not sell because he had discovered that the Canal was a poor asset; he sold because he needed liquidity. Nor did the sale resolve the crisis: it was followed by the establishment of the Caisse de la Dette Publique and foreign financial control, Ismail’s removal from power in 1879, and the British occupation of Egypt in 1882.
I am not saying that the sale alone caused the occupation—history is far more complex than that—but the lesson is clear: liquidity extracted from a strategic asset may solve an immediate problem, but it does not address the underlying causes that created the debt. For that reason, bringing the Canal once again into the debt equation, even in the form of an internal transfer between Egyptian institutions, warrants exceptional caution.
Third: Where Did the Debt Go?
This lies at the heart of the objection. If ownership of the Authority is transferred to the Central Bank, what happens to the holder of Treasury bills? What happens to the bank that lent money to the government? And what of investment funds and bondholders? Their claims do not disappear merely because an asset has been moved from one place to another on the balance sheet.
Transferring an asset from one state entity to another may rearrange accounting relationships, but it creates no new production, exports, tax revenues, or foreign-currency resources.
The question is: What would actually change in the economy’s ability to service its debt? If the causes of debt accumulation remain in place, we may change the appearance of the figure today, only to find it accumulating again in the years ahead.
Fourth: There Is No Need to Reinvent the Wheel
Debt management is not an obscure science; the tools are well known:
Extending maturities, reducing financing costs, decreasing reliance on short-term debt, maintaining sustainable primary surpluses, broadening the investor base, and increasing production and exports.
Jamaica provides a clear example: its public debt fell from approximately 140% of GDP in 2012 to around 62% in 2024.
According to an analysis by the International Monetary Fund, this was achieved through primary surpluses averaging more than 6% of GDP for over a decade, together with fiscal rules, oversight institutions, and political commitment across successive governments. There was no single sovereign asset placed against the debt figure that brought the problem to an end.
Hence my question: Where is the international precedent in which the central element of success was the transfer of an operating, income-generating sovereign asset to the central bank?
If such a model exists, let it be presented. What we do know, and what established economic principles tell us, is that debt requires management, not a single transaction.
Fifth: Egypt Is Already Moving in This Direction
We are not faced with only two choices: the “Grand Swap” or allowing debt to continue swelling. The Medium-Term Debt Strategy for 2026–2029 aims to reduce the debt of budget-sector entities to 71%–73% of GDP by 2028/2029, increase the average maturity of the debt portfolio to 4.5–5 years, reduce reliance on short-term Treasury bills, and lower financing requirements to 9%–11% of GDP.
This is precisely what established debt-management experience calls for.
Has the process been completed? Not yet.
Is the interest burden substantial? Certainly.
But there is a fundamental difference between a problem that requires years of sustained work and claiming that all available tools have been exhausted, leaving the Canal as the only remaining option.
The same applies to external debt figures. When a figure of approximately $62 billion falling due within 12 months was circulated, Finance Minister Ahmed Kouchouk explained that more than two-thirds of that amount consisted of Arab deposits that had been agreed for renewal, while approximately $9.5 billion was due from budget-sector entities during 2026, in addition to banking facilities, some of which are routinely renewed. This does not negate the costs or risks involved, but it illustrates why debt maturities must be examined in detail.
Sixth: Non-Strategic Assets
I do not oppose using the State’s non-strategic assets as part of economic reform. Land, buildings, and commercial stakes may be developed, brought into partnerships, or divested when doing so represents the soundest economic decision. But there is a profound difference between maximizing the value of a non-strategic asset and using a productive sovereign asset to pay down debt.
The Canal is not an idle asset in search of a purpose. Indeed, the more important question points in precisely the opposite direction: How can we make it generate greater value than it does today? Transit fees are not the whole story. There are also the economic zone, ports, logistics services, ship bunkering, repair and construction, export-oriented industries, and green energy.
When it comes to maximizing income, the area surrounding the Canal is more important than the Canal itself. If we want the Canal to help alleviate the debt burden, the logical course is to multiply the wealth generated by its location—not to enter ownership of that location and of the Canal itself into the debt ledger.
Hassan Heikal may be right that the debt crisis requires big ideas, but a big idea is not necessarily “the biggest deal.”
Sometimes the more difficult—and more successful—course is to persist for years with the right policies: longer-term, lower-cost debt; an economy with greater production, exports, and investment; and better management of non-strategic assets.
Egyptians paid the price of the Canal during its construction; then they paid the price of losing their share in it under the pressure of debt; and then they paid the price of restoring their sovereignty over it. I do not believe history requires us to try the idea a third time before we understand the lesson.
