The economic and social development of the Egyptian government plan for the year 2022/2023 revealed that foreign investment in public debt was 28.8 billion dollars last December when it was 34 $1 billion in September 2021.
The economic and social development plan, which we obtained a copy of before presenting it to the Parliament, confirmed that the Egyptian government plans to get foreign funds (approximately 146.4 billion pounds), compared to about 78.4 billion pounds planned for this year’s budget. According to the plan, the 2022-2023 budget plans to issue international obligations equivalent to 91.5 billion pounds, noting that global bonds have reached 66 billion pounds in the current budget. Furthermore, the plan’s target is to borrow 54.9 billion pounds from international financial institutions other than the loan from the International Monetary Fund, noting that it is 12.4 billion pounds in the current budget.
According to the Central Bank of Egypt’s data, the country’s external debt has increased since 2012 by 275% to reach $145.5 billion in 2021, while it was $38.8 billion in 2012. Egypt’s average annual external debt increase over the past three years has reached $16 billion. According to the document we have obtained, the debt interest expected in 2022-2023 is around 690 billion pounds, compared to 579.6 billion pounds expected this year. The document also revealed an increase in revenue for the Egyptian government in the new financial year (estimation), with tax receipts rising 23.5% to register around 1.168 trillion pounds. The government seeks to collect more tax revenue related to cigarettes and tobacco to reach 86.7 billion pounds instead of the 79 billion pounds expected for the current financial year. It is a 9.7% increase.
The Egyptian government plans to spend 2 trillion pounds in the next fiscal year, compared to 1.840 billion pounds approximately in the current fiscal year. Egypt aims to reduce the budget deficit to 6.1% of GDP from 6.2% in the current budget. In addition to increasing the primary surplus to 1.5%, compared to the target of 1.2% for the current fiscal year. Also, according to the new budget, the Egyptian government plans to issue “Panda” bonds in yuan on the Chinese market.
A net decline in foreign assets in Egypt
In the same context, the external assets of the Central Bank fell to 169.7 billion Egyptian pounds (9.17 billion dollars) in March, to register the most significant drop since the outbreak of the Covid-19 crisis in February 2020. According to the Central Bank’s latest report, net foreign assets fell to -221.3 billion pounds, at the end of March, from minus 51.69 billion pounds in the previous month, declining for six consecutive months from positive 186.3 billion pounds at the end of September 2021.
Egypt is currently suffering from a dollar liquidity crisis and a shortage of foreign currency in Egyptian banks, which has led to crises in many companies and factories, as most markets are suffering from a lack of goods and imposing restrictions on imports from abroad. Also, Egyptian Prime Minister Mostafa Madbouly is scheduled to hold a press conference early next week to announce the Egyptian state’s plan to deal with the current economic crisis.
A shortage of goods due to the lack of importers
In this context, Dr Rashad Abdo, the economic expert, criticized the recent decisions of the Central Bank of Egypt relating to the prohibition of the implementation of import operations for any client approaching the bank with any foreign currency from an unknown source. Abdo said in exclusive statements that this step was not well thought out. Still, it also had some excellent points while getting negative aspects since the decision aimed to eliminate dollarization and eliminate the black market’s currency and impose restrictions on the use of the dollar in import transactions.
Abdo added that the negative aspect of the Central Bank’s decision to prevent the implementation of import operations in foreign currencies of unknown sources is that the financial liquidity provided by the importer balances supply and demand in the market by delivering goods, and thus prices will stabilize. But after the decision of the Central Bank, the market was exposed to a shortage of goods due to the inability of the importer to provide sufficient liquidity, in addition to an increase in prices, which led to high inflation rates.
The economic expert expected a rise in the inflation rate during the coming period, explaining that the continuation of the Russian-Ukrainian war increases the risks of high inflation rates because Russia and Ukraine’s exports exceed 31 per cent of wheat, in addition to exports of oil and other products, noting that it can be worse if Russia controls the Ukrainian city of Odesa, by which Russia will block Ukraine from ports, thus affecting Ukraine’s exports, which is the European food basket.