General Abdel Fattah al-Sisi’s regime stands in a difficult position during the current year 2020, amid commitments to pay foreign debts, debt installments, and high interest rates. The Egyptian predicament is exacerbated by the continued resort of the regime to internal and external borrowing, devouring giant projects with huge budgets such as the new administrative capital and the new El Alamein, which imposes large burdens on the state budget. The Egyptian government raised its initial estimates for external debt service during 2020 to over $18.6 billion, by $9.24 billion during the first half of the year, and $9.35 billion in the second half. According to official data issued by the Central Bank of Egypt, Egypt is obligated to pay three types of debt – short-term, medium and long-term.
75.8 per cent of Egypt’s external debt falls within the long-term debt at a value of $82.4 billion, while the medium-term debt ratio is 14 per cent at a value of $15.2 billion, and the short-term debt ratio is $11.1 billion, or 10.2 per cent of the total external debt. And the volume of short-term debts owed to Egypt, until the end of next March, amounted to $4.016 billion, distributed by $3.983 billion in installments, and $32.14 million in interest.
Most of this debt relates to a currency swap agreement with China, which Egypt signed three years ago at about $2.737 billion. Domestically, the debts with a term of less than a year accounted for about 61.9 per cent of the existing debts, while the ratio of debts with a term between one to three years was about 28.9 per cent, compared to 7.1 per cent for a term from three to five years, and 3.8 per cent for a term of five to seven years, and 2.1 per cent for seven to 10 years.
The total deposits of Gulf countries with the Central Bank of Egypt, stand at about $17.269 billion, of which $7.5 billion are Saudi deposits, $5.769 billion are Emirati deposits, and $4 billion are Kuwaiti deposits. Periodically, the Egyptian government has resorted to renewing the term of these deposits, with high-interest rates, because of its inability to pay, which makes them hostage to the political agenda of those countries, specifically Riyadh and Abu Dhabi. Last year, Cairo managed to amend the payment date with the three capitals, with new deadlines, so that Saudi deposits are due in four installments, while the Kuwaiti deposit is paid in two installments, and the UAE deposits are due in 10 installments. Last October, the Governor of the Central Bank of Egypt (CBE), Tariq Amer, signed an agreement to renew Saudi deposits in CBE, with the Vice President and Managing Director of the Saudi Fund for Development, Khaled Bin Sulaiman al-Khudairy. Amer said at the time that the time period for Saudi, Emirati and Kuwaiti deposits maturing had been renewed and extended, without revealing the terms of the extension, and the interest rates to be paid.
In addition to the schedule for repaying Gulf debts, Egypt is obliged to pay about $700 million, the value of the external debt installments due to the Paris Club, which are paid every six months. Paris Club includes 19 countries from the major economies in the world; USA, the United Kingdom, France, Germany, Switzerland, Australia, Austria, Belgium, Canada, Denmark, Finland, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, and Sweden. Internationally, it is also time to pay several installments to international institutions such as the International Monetary Fund, the World Bank, the European Investment Bank, and the African Development Bank, with total debts of $32.8 billion. This value is distributed to the International Monetary Fund at $11.2 billion, the World Bank at $10.6 billion, the European Investment Bank at $3.2 billion, the African Development Bank at $3 billion, and the Islamic Development Bank at $3 billion. The rest of Egypt’s foreign debt is divided into five members from the Paris Club, who are Germany with $3 billion, Japan with $2.5 billion, France with $1.5 billion, the United States with $1.3 billion, and Britain with $1.1 billion, in addition to $6.5 billion for China.
What is dangerous is that CBE’s data revealed at the end of last June that the value of foreign debt, medium and long-term including interest, had increased to $129.372 billion. The short-term external debt, including interest, which is due to be repaid within a year, is about $11.181 billion, bringing the total short, medium and long-term external debt to $140.552 billion, which is a huge debt that the Egyptian economy cannot afford. According to the Egyptian economist Mamdouh al-Wali, it will take more than half a century to repay the installments of the Egyptian external debt, which extends to 2071. Al-Wali’s warnings are consistent with reports issued by the Moody’s credit rating agency, which confirms that the debt interest bill due on Egypt threatens economic reform in the country, and adds more inflexibility in the public budget, most of which is devoted to paying debts and installments, and debt interest. Surprisingly, Amer bragged that debt was still within the safe limits, despite fears of nonpayment, and that the foreign reserve of $45.457 billion at the end of last December was mostly deposits and loans, in addition to the increase in domestic public debt to EGP 4.186 trillion ($270 billion) at the end of the first quarter of the current fiscal year 2019-2020. It is clear, then, that Egypt faces a difficult payment schedule during 2020, amid huge political and economic challenges, which heralds a financial crisis that in the future may take the country into a dark tunnel.