The Egyptian government has practiced many games and tricks since the beginning of the corona pandemic, to hide the reality of the situation of external debt, and the huge leap it witnessed during the epidemic period. Egypt’s external debt reached $134.8 billion at the end of March, compared to $ 111.3 billion in March 2020 when the pandemic began, with an increase of 21 per cent.

The government tried to justify this large increase by saying it was necessary to fight the corona epidemic, but the fact derived from the data analysis confirms that this is the same increasing trend of external borrowing during the last 10 years.

Four times in one decade

The Egyptian Initiative for Personal Rights revealed, in a lengthy report entitled “External Debt 2020: Corona Raises Indebtedness,” that the annual increase in external borrowing has increased in conjunction with Egypt’s agreement with the International Monetary Fund in 2016, where the debt more than doubled during the period 2017- 2020.

In 2020, Egypt exceeded the maximum limit available to it to borrow from the International Monetary Fund, to become the second largest borrower from the fund after Argentina. External debt increased nearly four times its level in 2010 and reached about 35 per cent of GDP in 2020, compared to 15 per cent in 2010. Based on that acceleration in external borrowing, the per capita debt has more than doubled, reaching about $900 per person, compared to only $400 at the end of 2010.

The negative effects of the increase in loans are exacerbated by the fact that they are not directed to projects that generate dollar returns, nor are they directed to social spending priorities such as education, health and social assistance, as official data indicates a decrease in the share of education, health and poverty aid from the government’s total external borrowing to a percentage that does not exceed 3.6 per cent.

Government tricks

The first trick practiced by the government to conceal the reality of the external debt situation is obfuscation, as the official announced statements suffer from inconsistency, lack of coherence and delay in publishing by months, all of which are signs of a lack of transparency. For example, the Central Bank was late in issuing the external situation report for Egypt for a whole year, and the delay in issuing the bank’s monthly reports became the norm. The data on the debt volume in September 2020 was announced in January 2021, and the March 2021 data was issued in July 2021, i.e., four months late.

Egypt’s external debt is much larger than the announced figure ($134.8 billion), as the government refuses to consider treasury bills owned by non-resident foreigners among foreign loans. Treasury bills owned by non-residents are short-term loans in Egyptian pounds, that is, due within less than a year. But those non-resident speculators, when they recover the value of their money, in addition to the interest they earned, exchange that money for dollars for the purpose of transferring it abroad, so they are considered disguised foreign loans, but the government refuses to recognise this. The value of the local currency loans owned by foreigners last November amounted to $23 billion, according to the Minister of Finance’s statements. These loans should be combined with external borrowing because their holders are non-residents and are repaid in dollars, and thus represent a burden on the exchange market.

The government also deceives the Egyptian people to hide the reality of foreign debts, by diversifying the borrowers, as the central government is no longer solely responsible for foreign loans, but rather several government agencies. This makes it difficult to track the external debt, because most of it does not appear in the general budget. Also, in many cases, these loans are not discussed by parliament, and therefore they are not approved or monitored. The House of Representatives does not monitor central bank loans or state-owned commercial banks, nor does it monitor external borrowing through treasury bills or international bonds of all kinds.

This situation gave the government an advantage, which is to hide the overall picture of external debt, so that it appears less than it is. The indicators look better to the public, as well as in the accounts published by the International Monetary Fund. The government is proud of the rise in foreign exchange reserves to $40.6 billion, but it deliberately does not mention that half of the international reserves held by the central bank are destined to pay off short-term debts, and therefore the real reserve is only about $20 billion.