Egypt Watch

Egypt’s external debt jumps to $109 billion in one year

Egyptian government data has revealed that Egypt’s external debt has risen significantly in one year, which is a challenge to the Egyptian economic system, which is facing an increasing cycle of debt. According to this data, external debt reached $109 billion at the end of June 2019.

A year ago, external debt was $93 billion, a $16 billion increase of 17 per cent. According to this increase, Egypt’s external debt is equivalent to about 37 per cent of GDP, which is not a small percentage, especially if added to the domestic debt, and the external public debt now exceeds 205 per cent of the proportion of Egyptian goods and services exports.

Against this significant increase in external debt, foreign exchange reserves recorded only a modest increase during the same period. At the end of June, foreign exchange reserves reached $44.335 billion, up $94 million from a year ago.

Economists consider that Egyptian debt rates are worrying, pointing out that Moody’s has warned of Egyptian debt affordability as measured by interest to revenue will remain very weak and will need large amounts of financing in the next few years. But Cairo has shown no response to those warnings, and since the end of the first half of 2019, Cairo has continued to borrow billions from abroad.

In August, Egypt received $2 billion in the last installment of the IMF loan. More than one ministry in the Egyptian government, including the ministries of social solidarity and the environment, are negotiating with the World Bank for new loans from the IMF.

The Egyptian Ministry of Finance is currently preparing for the launch of international bonds worth between $4 billion and $7 billion during the current fiscal year, in addition to other types of debt securities.

The IMF said it expected Egypt’s economy to grow 5.9 per cent in the fiscal year ending in June, unchanged from its April forecast. This percentage is below the government’s target of six per cent to seven per cent.

Egypt’s domestic public debt is no better than external debt. In September, official data revealed that Egypt’s total domestic public debt rose by 18.8 per cent year-on-year in March 2019. Egypt’s total public debt rose to around EGP 4.204 trillion ($256 billion) in March 2019, according to data released by the Central Bank of Egypt (CBE) on Tuesday. According to CBE, domestic public debt stood at EGP 3.538 trillion ($ 215 billion) in March 2018.

The Egyptian government is facing the impasse of the high volume of debts owed during the rest of this year, amounting to about $14.5 billion, according to the CBE’s latest reports. Egypt’s public debt has risen during the al-Sisi era by 131 per cent since June 2014.

The dramatic increase in Egyptian debt raises deep questions about the success of Cairo’s economic reform programme, which has caused unprecedented waves of high prices.

Egypt has implemented an economic reform programme from the IMF since November 2016, under which the Egyptian government received $12 billion divided over three years. The programme includes reducing energy subsidies for electricity and petroleum products, increasing tax revenues, and adjusting the state budget.

These measures have increased the suffering of Egyptian families, but the problem is that the Egyptians do not see any improvement in economic conditions.