Suez Canal for Egypt’s Debt: Why Has the Proposal Sparked Widespread Controversy?

The controversy over the proposed “grand swap” of the Suez Canal for Egypt’s $165 billion debt was about more than a simple economic idea aimed at easing the country’s debt burden.

It raised a much bigger question: can sovereign assets that generate foreign currency be treated as bargaining chips in debt settlements? And what could happen if an idea that begins as a proposal moves toward implementation?

The proposal was put forward by businessman and banker Hassan Heikal, son of the late writer Mohamed Hassanein Heikal, on August 29, 2026, in a post on X. It called for transferring ownership of state-owned assets to the Central Bank in exchange for settling part of the domestic debt, with the Suez Canal among the assets he cited.

The Egyptian government intervened the following day, August 30, with an unequivocal denial, stressing that the canal was not subject to a swap, pledge, or transfer of ownership.

But the government’s denial did not end the story. The proposal brought back a question that has remained at the heart of Egypt’s economic debate in recent years: if the state is looking for assets whose returns can be increased or opened up to investors to ease its debt crisis, which assets could attract regional and international capital?

And could a “swap” eventually evolve from the transfer of ownership between government entities, as Heikal proposed, into privatization, the granting of usufruct rights, or a partnership with investors at a later stage?

The proposal’s real significance lies in what the Suez Canal represents. It is not an ordinary economic asset but a major source of foreign currency and a strategic artery for global trade, with direct implications for Egypt’s national security and sovereignty, according to economic experts.

That is why even placing the canal in the debate, even as a personal proposal, is fundamentally different from putting a company, a piece of land, or a hotel up for sale.

The idea has therefore raised a broader question among political and economic circles: why has the notion of a “swap” emerged now? Why has the Suez Canal become the most contentious asset in the debate? And who could eventually own, manage, or secure usufruct rights over assets of this scale if circumstances change?

Behind the ‘Grand Swap’

The story behind Heikal’s proposed swap emerged from the end of the debate rather than its beginning. The familiar questions soon followed: why was the idea raised now? And why at such a sensitive moment, after the Central Bank of Egypt confirmed that the country’s external debt had risen to $164.8 billion?

On August 12, 2026, the World Bank revealed that the Egyptian government was required to repay $62.8 billion in external loans over 12 months, from April 2026 through March 2027.

The debt due within a year includes $7 billion in interest on existing debt and $55.8 billion in loan principal repayments. Of that, $21.1 billion is tied to deposits and currency holdings from Gulf countries, which could be rolled over or converted into investments. There has also been discussion of Egypt “breaking away” from the International Monetary Fund (IMF) after becoming trapped by its debt burden.

Against this backdrop came the proposal by businessman and economist Hassan Heikal to swap state-owned assets, including the Suez Canal Authority, for part of the domestic debt in an effort to “ease the burden of debt interest on the budget.” The proposal immediately raised questions about how it related to the developments that preceded it.

Heikal unveiled what he called the “grand swap” on X, saying the idea would involve the Finance Ministry transferring some state-owned assets to the Central Bank of Egypt, with the corresponding debt transferred from the Finance Ministry to the central bank in return.

He stressed that the proposal did not involve selling the assets to investors or outside parties but transferring their ownership to another government entity. In his view, that would constitute neither privatization nor a sale of state assets.

Heikal said the idea was modeled on an earlier effort to wipe out the Egyptian state’s debt related to the state-owned radio and television broadcaster Maspero by swapping assets, most of them land, while transferring Maspero’s outstanding debt to the National Investment Bank. He proposed applying the same model to the Suez Canal, but with the central bank this time.

The portfolio of assets that could be included, Heikal said, could encompass the state’s holdings in banks, insurance companies, electricity companies, productive enterprises, and economic authorities. The Suez Canal was one example he cited, but he later clarified that if there were sensitivities surrounding the canal, other assets could be used instead.

Heikal said the main motivation behind the proposal was the rising cost of servicing domestic debt, which he estimates consumes around 50% to 60% of the state’s total revenues. That leaves the budget with limited room to spend on public services and social protection.

He added that the state budget is “the only budget that spends on citizens,” arguing that the continued burden of high interest payments leaves the government unable to spend enough on health insurance, education, subsidies, and higher wages.

He therefore argued that transferring debt and assets between two government entities could free up budgetary resources by easing the interest burden. He said he saw no other solution on the horizon capable of addressing the problem to the same extent.

Heikal, who was reportedly chosen as an economic adviser to the prime minister two years ago, also stressed that the proposal had nothing to do with deposits held by the banking system. His plan, he said, was simply to transfer assets and corresponding debt between state institutions.

Hassan Heikal, the son of the late journalist Mohamed Hassanein Heikal, is a prominent figure in the financial sector. In recent years, he has promoted a plan to transfer massive amounts of public assets to the central bank, equivalent in value to the country’s public debt, with the bank taking on the interest payments and easing the burden on the budget.

In its statement, the Cabinet did more than deny any plans to implement the “grand swap.” It said that what had circulated about transferring ownership of some assets, including the Suez Canal, to the Central Bank of Egypt in exchange for settling part of the domestic debt “reflects the personal view of its proponent.”

Prime Minister Mostafa Madbouly also denied on September 3, 2026, that businessman Hassan Heikal was his adviser, saying that Heikal had been among the members of advisory committees formed by the government to hear different views and perspectives.

The prime minister stressed that the Egyptian state has a clear policy and firm principles that cannot be breached and that the Suez Canal “cannot be touched in any way.”

He said this was because the canal is one of the assets of the Egyptian state and one of its strategic facilities linked to national security and sovereignty, stressing that it cannot be swapped, pledged, or transferred in ownership against any debt.

In an earlier statement, the Cabinet said proposals to swap public assets for domestic debt had previously been studied and assessed, with the conclusion that the approach was not suitable for implementation.

The government explained that transferring assets and liabilities between state entities does not, by itself, reduce the state’s overall obligations. It categorically stressed that the Suez Canal was not part of any proposal to swap, pledge, or transfer its ownership against debt.

The government says it is seeking to reduce the debt through sustainable fiscal surpluses, higher revenues, more efficient spending, extending debt maturities, and lowering debt-servicing costs, while maximizing returns from state assets through asset-offering programs, including sales and partnerships with the private sector.

Alongside the official rejection, social media platforms were flooded with hostile comments, some of which focused on what critics saw as a potential conflict of interest, arguing that Heikal himself could be among the leading buyers of state assets put up for sale if his proposal were adopted. 

Others criticized the idea as falling in line with a policy of stripping public assets and transferring them to wealthy private owners, who could potentially acquire them at bargain prices as they are sold amid rising levels of indebtedness.

On August 31, 2026, Egyptian businessman Hassan Heikal backed away from his proposal to include the Suez Canal in what he had described as the “grand swap.” His proposal called for transferring ownership of a number of state assets, including public companies, land, and the Suez Canal, in exchange for settling domestic debt. He did so following the widespread controversy and the government’s official rejection.

“If the sensitivity is about the Suez Canal, other assets can be used instead,” Heikal said in a post on X.  He also clarified that he is not an adviser to the Egyptian prime minister.

The Suez Canal has a distinct status compared with other public assets because of its role as an international waterway, a strategically important source of revenue for the Egyptian economy, and a sovereign asset.

Under Law No. 30 of 1975, the Suez Canal Authority is a public entity with an independent legal personality responsible for managing, operating, maintaining, and improving the canal, and it has its own independent budget.

The 1956 nationalization decree transferred the funds, rights, and obligations of the Universal Suez Canal Company to the state and established an independent authority to manage the canal, which the decree described as “a public utility owned by the state.”

The Suez Canal: A Trial Balloon?

Because the debt swap proposal was specifically linked to the Suez Canal, it sparked debate over the canal’s economy, revenues, ability to generate foreign currency, and strategic value, bringing questions to the fore that go beyond the merits of the swap itself.

What does it mean to give up ownership of an asset that generates a steady income in exchange for eliminating an existing debt? Does it make sense to give up an asset that generates future cash flows in order to extinguish an existing liability? Or is the idea simply a “trial balloon” designed to gauge the reaction?

Economic analysts questioned whether the timing of the proposal to swap Egypt’s debt for assets, including the Suez Canal, and the fact that it came from someone who had served as an adviser to the prime minister or was part of a circle of advisers consulted by the government from time to time, was “deliberate” or merely a personal proposal unrelated to any government policy.

Economic analyst Mostafa Abdelsalam raised the question in an article posted on Facebook, asking, “Is what is happening these days a ‘trial balloon’ and a way for the government to gauge public reaction in Egypt to this dangerous and unprecedented proposal, which takes us back to the era of Khedive Ismail?”

He questioned why this “poisoned initiative” had been put forward for a second time in four months, proposing that state assets be disposed of and swapped to repay public debt through the Central Bank of Egypt, and why it had come from one of the government’s most prominent economic advisers, despite the idea having previously been studied and rejected.

He also asked why the initiative had been proposed at this particular moment, while the government is going through a critical and uncertain period because of reckless domestic and foreign borrowing, which has exceeded 13.3 trillion Egyptian pounds, equivalent to $266 billion, while citizens are facing a devastating cost-of-living crisis.

“We have never heard of a central bank managing and owning assets, companies, land, real estate, and waterways while negotiating the most efficient ways to manage them and maximize their returns,” Abdelsalam said.

He added that central banks around the world do not own assets or deal with clients, whether depositors, savers, or investors. If they did, he argued, they would face accusations of conflicts of interest: how can a central bank own banks while also being responsible for supervising them?

Economist Amr Adly wrote on the Almanassa website on September 2, 2026, that the idea of wiping out Egypt’s public domestic debt by selling state-owned assets, including land and public facilities, and perhaps even the Suez Canal itself, to the central bank and later to the private sector, is “impractical and undesirable for many reasons.”

He explained that no country is entirely free of public debt and that no state currently has “zero public debt.” He argued that reducing Egypt’s debt, which stands at trillions of pounds, to “zero” is neither possible nor desirable because public debt serves as a form of financing for some essential areas of government spending.

He said that eliminating public debt rather than managing it more sustainably would make the banking sector one of the first to suffer, as banks would lose the returns they earn from government Treasury bills and bonds. These are considered safe investments that banks use to balance their portfolios against other, higher-risk investments.

He added that banks that had previously lent to the government would face difficulties finding new borrowers once the state stopped borrowing. This would increase the supply of credit and drive up inflation, citing the example of the U.S. federal government, which repaid all its debt in 1836, only for the U.S. economy to be hit by a major crisis in 1837 as banks were left with excess liquidity.

Economic researcher Mohamed Ramadan had also examined Heikal’s proposal shortly after it was first raised, in an article published by Mada Masr on January 21, 2026, pointing to a number of ambiguities in the proposal.

He explained that the proposal would involve shifting the burden of debt from the Finance Ministry to the central bank, effectively relieving the public budget of interest payments by moving debt-servicing expenses out of the budget and onto the central bank.

But this, Ramadan argued, does not change the fact that the principal debt remains unchanged and continues to accrue interest. Under the new scenario, the government, represented by the central bank, would ultimately bear the same cost.

“What is the logic, in restructuring domestic debt because of its high local interest rates, of tying those interest payments to the dollar as well? Does Egypt even have enough dollar liquidity to do so? Of course not,” he said.

Who Would Buy It?

The question that followed the discussion of swapping the Suez Canal for debt was a simple one: who could be a potential buyer if the idea were ever to evolve into a sale or the granting of usufruct rights?

Egyptian economists, writing on social media and in newspapers, identified four groups that could potentially be in the running: Gulf sovereign wealth funds, global companies operating in ports and logistics, international infrastructure and investment funds, and China and its state-owned and state-linked companies.

Some rejected any attempt to link a potential deal specifically to China, pointing out that its economic presence in the Suez Canal region is already substantial. According to the Egyptian government, Chinese investments in the Suez Canal Economic Zone are estimated at around $4 billion.

During Chinese President Xi Jinping’s latest visit, Beijing and Cairo announced plans to expand the Chinese industrial zone in the Suez Canal area. The announcement came amid efforts to frame the visit as primarily commercial, although there was also talk of a possible military deal.

The third phase of the expansion of the China-Egypt TEDA Economic and Trade Cooperation Zone in the Suez Canal Economic Zone was launched, opening the way for further Chinese investment in renewable energy, automobile manufacturing, textiles, and chemical fibers, according to Egyptian newspapers and Reuters in early September 2026.

There is no published evidence so far linking the Chinese president’s visit to the proposal to swap the Suez Canal for debt, despite the timing of the two events. Xi arrived in Cairo in early September, just two days after the Egyptian government officially denied that the canal could be swapped for debt.

According to Egyptian experts, Beijing does not necessarily need to own the canal to become a major player around it. Its investments in ports, industry, energy, logistics, and the economic zone are already giving it growing economic influence around one of the world’s most important trade routes.

According to Egypt’s official government portal on October 23, 2025, the zone was already home to more than 200 Chinese companies, while Cairo and Beijing were seeking to expand it to attract further industrial investment.

Economic reports confirm that China has poured billions of dollars into sectors linked to the Suez Canal, while Egypt is seeking to diversify its strategic partners. This suggests that the issue may be less about selling the canal itself and more about Cairo seeking a partner to strengthen economic control over the area surrounding it.