Mohamed Seif Eldin-Cairo

Official figures and data concerning Egypt's total external and internal debt indicate significant growth, leading some to question the country's ability to repay its debt, especially as it expands borrowing from abroad to fill the budget deficit.

According to the latest figures announced by the Central Bank of Egypt, Egypt's external debt at the end of March reached about 106.2 billion dollars, compared to about 88.16 billion dollars in the same period last year, an increase of about 18.1 billion dollars, equivalent to about 35.1% of GDP.

On a year-on-year basis, domestic public debt rose 20.25% to LE 4.108 trillion ($ 241.9 billion) at the end of December, representing 78.2% of GDP, of which 85.3% of government debt and 8.3% of GDP. Economic bodies, and 6.4% on the National Investment Bank.

Despite the government's expectations of its ability to fully repay the debt in August 2021, experts ruled out talking to Al Jazeera Net, especially in light of the expansion of borrowing from abroad and spending on non-economic projects.

Huge debts

Following the military coup against the late President Mohamed Morsi in the summer of 2013 and until the first half of this year, the central bank paid about $ 36.7 billion of debt.

The debts due during the second half of this year amount to about $ 14.5 billion, distributed as follows:

$ 1.48 billion for the Paris Club member states.

1.69 billion for a number of international institutions.

$ 387.36 million interest on Eurobonds issued by the Ministry of Finance in international markets during the last period.

$ 2.07 billion worth of deposit due to the State of Kuwait.

$ 5.25 billion deposit premiums to Saudi Arabia.

$ 78.2 million interest on UAE deposits.

$ 28.1 million interest on sovereign bonds issued by the government in 2010.

$ 3.5 billion worth of short-term debt.

Despite the sharp rise in the volume of debt, especially external, government officials stressed that there is no cause for concern, expecting to pay it in full by 2023, according to the Minister of Finance, Dr. Mohammed Maait on August 3 last year.

"Within two years, we will eliminate the debt once and for all, and deliver a safe Egypt to those who come after us," Maait said during a workshop titled "Sources of Financing for Private Investors."

dilemma

As for the extent of the government's expansion in the borrowing process and the rise of debt in general on the local economy, Egyptian economist Mohamed Kamal Okda, director of the Center for "Crisis Look" (America-based) believes that the Egyptian economy will suffer in the coming period due to the rise of the local public debt.

He told Al Jazeera Net that this will adversely affect the private sector, due to his inability to obtain a loan from Egyptian banks because of the state's competition in borrowing from the domestic or global market, and thus the economy will decline and weaken the ability of the private sector to compete, produce and pay taxes, This is one of the sources of financing the state budget, as well as the decline in the credit rating of Egyptian companies, which will lead to higher interest rates on borrowing for all, including the government.

In turn, Egyptian economist Ahmed Zekrallah ruled out Egypt's ability to pay its debts during the coming period, stressing that Cairo is facing a "predicament" it started with large debts to implement projects that are not economically feasible, which led it to spend huge funds were not calculated or within the scope of priorities, as well as it They were not able to recycle the productive wheel, resulting in the accumulation of debt in Egypt.

In September, Egyptian President Abdel Fattah al-Sisi said his country had set up major projects at a cost of more than four trillion pounds away from the state budget.

Posting the invoice

Speaking to Al Jazeera Net, economist Ahmed Zekrallah added, "What the Egyptian government was able to do during the last period is recycling loans, in the sense of obtaining new loans to repay debts and interest for old loans, and work to prolong the debt, where it moved from short-term to medium debt Long-term and long-term. "

The economist pointed out that the crisis of low interest rates in the world - as well as recession - helped the Egyptian government to obtain loans easily.

After the government announced the long-term bonds, economist Mamdouh Al-Wali warned of the danger of burdening future generations with heavy burdens that reduce the ability of the financial policy maker at the time to move freely, to direct more spending towards government investments to improve the level of facilities and infrastructure, according to Al Jazeera Net.

The economist Ibrahim Nawar also stressed the danger of transferring the external debt burden to future generations, in light of the current government, which means that it does not involve any amount of justice between generations.

"In the end, it is the citizen - not the government - who pays the repayment of domestic and foreign debts. This may be possible if the economy and the citizen benefit from the fruits of the debt, but it is unacceptable that the citizen should bear the burden of repayment and hardship at a time when it is deprived of its fruits," he said. .

Reduce risk

Despite concerns about rising debt, Capital Economics, in a report last August, spoke of a range of factors limiting Egypt's external debt risk.

These factors include the high percentage of foreign reserves, which greatly helps to secure and meet the financial needs of foreign exchange, in addition to securing Egypt's commitment to repay its foreign debts as well.

In July, Egypt's foreign exchange reserves amounted to $ 44,916 billion compared to $ 44.335 billion at the end of the previous month, an increase of about $ 560 million, the largest increase in nearly five months.

Another factor that reduces the risk of debt is the appreciation of the local currency against foreign currency this year, making the pound relatively fair value against the dollar.

Since the beginning of this year, the pound has risen against the dollar by 9.85%, the highest level since 4 March 2017.

According to transactions on Monday, the average price of the dollar was about 16.05 pounds in most banks operating in the Egyptian market.

In the budget for the current fiscal year, the Egyptian Ministry of Finance aims to reduce the debt-to-GDP ratio to 77.5% in June 2022.

Egypt's fiscal year starts on July 1 and ends on June 30.