Mohamed Abdullah - Cairo

The global economic crisis has cast a heavy shadow on the Egyptian economy after receiving heavy losses that made it unable to continue investing in emerging markets because of its need for liquidity in the face of its own crisis, which threatens the exposure of the Egyptian economy, which depends on external financing and borrowing.

And estimates of major countries such as Germany, experts and economic and financial institutions that the current and ongoing crisis have surpassed the global crisis in 2008, and may become worse than the great global recession that struck the world in 1929, and warned of the great global collapse.

Under the rule of President Abdel-Fattah El-Sisi, the Egyptian authorities adopted two economic policies without taking into account a major economic crisis internally or externally that hit the whole world, which was a strong surprise for the Egyptian economy, which suffers from debt and poor production since July 2013, according to analysts and economists who spoke to the island Net.

The first policy is betting on borrowing and external financial financing - which economists have always warned against over the past years - to finance internal projects that have been described as useless or not priority, such as the new Suez Canal branch in 2015, the new administrative capital, and other projects.

The second policy is Sisi's announcement in statements that have sparked widespread controversy over his lack of recognition of what are called feasibility studies for projects that took place during his reign, and that if these studies were a decisive factor, about three quarters of these projects would not have been completed.

Sisi relied on a betting policy on borrowing and external financing to finance internal projects that are not a priority (Al-Jazeera)

The most urgent question
The external debt of Egypt at the end of last September increased by 17.7% to $ 109.4 billion, and the domestic public debt increased by 7.7% on an annual basis to 4.186 trillion pounds (about 266 billion dollars) at the end of September 2019, an increase of 298.2 billion pounds over 2018, According to the data of the Central Bank of Egypt.

The question has become more present: to what extent the Egyptian economy will be affected and stand up to the repercussions of the Corona economic crisis on the world in general, and Egypt in particular, after the economy mortgages to the external debt market and financing at the expense of developing and maximizing internal production.

Among the mistakes that the Egyptian authorities have taken is the imbalance of priorities, according to Amr Adly, Assistant Professor of Political Economy at the American University, in a recent article on the American Bloomberg website. "Economic reform tends to prioritize business over the expense of employment, and deals with the informal nature For workers as a feature of free market exchange. "

In an indication of the massive displacement of funds from emerging markets, bond funds recorded a record $ 109 billion displacement, and sales of various assets in the market caused a sharp decline in almost every category, according to Bank of America.

Creditors' pressure
Rating agency Moody's warned that stress tests indicate that countries like Egypt - which rely heavily on external financing - will suffer if the rise in the cost and terms of financing persists, because most of these countries are constrained by significant lack of independence and limited ability to access financing.

The specialized Egyptian Stock Exchange website mentioned that the interest of Egyptian bonds rose in international markets to record levels in light of the severe fluctuations witnessed by global stock exchanges in the past weeks.

And foreign investors keep $ 20 billion of Egyptian treasury bills denominated in the Egyptian pound at the end of February, according to Fitch International.

The interest of Egyptian bonds rose in international markets to record levels in light of the severe fluctuations in the global stock exchange (Al-Jazeera)

Submission to the desire of investors
Regarding the risks facing the Egyptian economy due to dependence on borrowing as a means of financing, the Egyptian banking expert in America Sherif Othman says that "the main problem is that many investment funds and foreign investors have rushed out of emerging markets to compensate for their losses in global markets, which results in withdrawing from the countries' reserves, Including Egypt. "

Othman explained to Al Jazeera Net that the effect of the situation could be observed on the changes in the Egyptian bond market, "Eurobond", and on the cost of insurance on the Egyptian debt, as the cost increased and the required return from the investors to buy them increased by at least 3 and 4%.

Othman expected that the Egyptian pound would be exposed to great pressures, and the central bank might leave it to retreat in limited rates that do not exceed 10% every year so that the Egyptian pound holders will not feel a loss in light of obtaining returns of 15% of the certificates of Egypt and Ahli Bank.

The lack of independence of the economy
For his part, the economic expert, Ahmed Zekrallah, considered that the ill-considered economic policies of the Egyptian government made the Egyptian economy not independent, and also made it dependent on external financing on the one hand, and external sources of income such as tourism, Egyptian labor and the Suez Canal on the other hand.


In his speech to Al-Jazeera Net, God mentioned that the Egyptian government had no choice but to external financing, indicating that there was a large withdrawal from the local treasury bills since the beginning of the crisis, and appeared in a successive decline in the value of the pound, and the high cost of insurance on Egyptian sovereign debt despite its talk of not relying on issuing New bonds, their reliance only on green bonds.

He pointed out that the international loan markets are no longer like the past, because the world is in the search for liquidity to help it out of the Corona crisis and its negative repercussions, in addition to an expected rise in the prices of global food chains due to the weakness of the different supply chains.