The Ministry of Finance in Egypt issued a statement announcing Egypt’s joining the New Development Bank (NDB), stressing that this will help Egypt meet its financing needs, and that this comes within the framework of keenness to diversify sources of financing.
The New Development Bank is an international financing platform set up by BRICS, a group composed of the five major emerging countries, Brazil, Russia, India, China and South Africa, six years ago to finance infrastructure and sustainable development projects in these countries as well as other developing countries. The bank, with a capital of $100 billion, finances projects in the areas of transportation, water and sanitation, clean energy, digital infrastructure, social infrastructure, and urban development. The bank aims to expand its work geographically to become the premier development institution for developing countries.
According to the Central Bank of Egypt, the external debt rose by $14.3 billion, to reach $137.85 billion at the end of June 2021, compared to $123.49 billion at the end of June 2020, an increase of 11.57%. According to the World Bank’s 2022 International Debt Statistics Report, Egypt’s debt has risen by nearly 200% since El-Sisi took power. Debt jumped from $36.77 billion at the end of 2010 to about $131.58 billion by the end of 2020, an increase of 257%, while it amounted to about $43 billion in June 2013 and about $46 billion in June 2014.
The Egyptian Initiative for Personal Rights issued a report last November in which it confirmed that the annual increase in external borrowing rose in conjunction with Egypt’s agreement with the International Monetary Fund as the debt more than doubled during the period 2017-2020. In total, it increased nearly four times its amount in 2010, and reached about 35% of GDP in 2020, compared to 15% in 2010.
According to the organization, 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 the first decade of the millennium. Because the loans are not directed to projects that generate dollar returns, nor are they directed to the priorities of social spending such as education, health and social assistance, this exacerbates the negative effects of the increase in loans. Official data indicate a decrease in the share of education, health, and poverty aid in the government’s total external borrowing, to a percentage that does not exceed 3.6%.
Egypt is forced to recycle its debt, that is, to re-borrow in order to repay, which raises questions about the fragility of the Egyptian economy and the extent to which its capabilities have been strengthened over the past years.