After years of ceasing to provide Egypt with deposits to support its cash reserves in foreign currency, and its orientation towards external borrowing from various international bodies, Saudi Arabia deposited a huge deposit in the Central Bank of Egypt for the first time in years.

And the Saudi Ministry of Finance announced - yesterday, Sunday - that the Kingdom deposited 3 billion dollars with the Central Bank of Egypt, in addition to extending previous deposits by 2.3 billion dollars.

The Saudi deposit is the sixth for Egypt and the first since mid-2017, when it deposited a deposit of one billion dollars, and since then Cairo has resorted to foreign loans and extended the terms of deposits it obtained from Gulf countries.

The Saudi statement apparently indicates that there has been little change in the total Saudi deposits since then, as reported by Reuters.

#Saudi Arabia offers a $3 billion deposit to the Central Bank of Egypt in addition to extending previous deposits of $2.3 billion according to "Reuters" pic.twitter.com/3rOjconmIf

- Al Jazeera Egypt (@AJA_Egypt) November 1, 2021

The return of Saudi deposits to Egypt after stopping them for more than 4 years raises questions about the reasons for their sudden return, despite the continuation of international institutions and banks to lend to Egypt, and their failure to pay.

The latest of which was the approval of the World Bank, last Thursday, to grant Egypt a loan of $ 360 million to support the Egyptian economy during the recovery from the Corona pandemic.

Waves of global inflation and the rise in commodity and food prices cast a shadow on the Egyptian economy, and reinforced the country's need for foreign currency to secure its reserves of food commodities, as Egypt is the world's largest importer of wheat.

According to data from the Food and Agriculture Organization (FAO) Food Price Index released in October, global food prices rose by an average of 32.8% year on year, the highest increase in a decade.

The sequence of Saudi deposits

Saudi Arabia’s deposits with the Central Bank of Egypt amounted to about $7.5 billion until mid-2020, distributed over 5 deposits with different terms and interest rates, before recovering a $2 billion deposit, bringing the total deposits, excluding the last deposit, to $5.5 billion, according to data from the report on the external situation of the Egyptian economy.

  • The first Saudi deposit was valued at $1 billion in May 2012 (half of which was paid).

  • The second Saudi deposit was worth $2 billion in July 2013.

  • The third Saudi deposit was worth $2 billion in April 2015.

  • The fourth Saudi deposit was valued at $2 billion in September 2016.

  • The value of the fifth Saudi deposit reached $1 billion in May 2017.

  • The sixth Saudi deposit was worth $3 billion in October 2021.

Experts: The Saudi deposit to Egypt raises questions about the reasons for its sudden return (Al-Jazeera)

Deposit term extension

The Egyptian government resorted to extending or restructuring the deposits (increasing maturities) it had from Saudi Arabia, the UAE and Kuwait, amounting to about $18 billion, and this saved it from the trap of default and supported the foreign reserves.

Saudi Arabia’s share of the total Gulf deposits before the last deposit is $5.5 billion, the UAE $5.67 billion, and Kuwait $4 billion, according to the data of the report on the external situation of the Egyptian economy.

And the Governor of the Central Bank of Egypt, Tariq Amer, has long stressed - in previous statements - that Gulf deposits (Saudi Arabia, the Emirates, Kuwait) play an important role in supporting the Egyptian monetary reserve, noting that they are constantly renewed.

Return of deposits a negative or positive indicator?

Economist Hafez El-Sawy said that returning to deposits of this size at this time, after years of relying on the international debt market, "reveals that the economic conditions in Egypt are in real decline."

He believed - in statements to Al Jazeera Net - that the government's talk about an improvement in macroeconomic indicators does not reflect the reality, because Egypt in this case lacks the most important conditions for borrowing from abroad, which is the sustainability of the debt, and this means that the debtor state does not request a postponement or rescheduling of debt payments. And do not fail to pay these obligations.

But since 2018 - and the talk is still for Al-Sawy - Egypt continues to request an extension of the maturity dates of deposits and its transformation from deposits with a zero interest rate to a rate of 3.5%, then the Saudi deposit comes under the title of supporting the cash reserve to face the repercussions of the Corona crisis.

Saudi Arabia: $3 billion deposit to Egypt and extension of previous deposits


Skip the block: https://t.co/CO8FGSyqvU


For more: https://t.co/UBLDRlzCtA# Mubasher #Egypt #Saudi

- Al Jazeera Mubasher (@ajmubasher) November 1, 2021

Unprecedented foreign debt

Last September, the Central Bank of Egypt revealed an increase in foreign currency cash reserves by 153 million dollars to 40.825 billion dollars, compared to 40.672 billion dollars at the end of the previous August.

On the other hand, Central Bank data showed an increase in the volume of Egypt's external debt at the end of the last fiscal year 2020-2021 by about $14.4 billion compared to the previous fiscal year 2019-2020.

The total external debt rose in an unprecedented manner to about 137.8 billion dollars at the end of the fiscal year ending last June, compared to 123.4 billion dollars for the previous fiscal year.

3 benefits of the Saudi deposit

Mohamed Abdel-Aal, an economic expert and former member of the board of directors of the Suez Canal Bank, praised the Saudi deposit, and its role in maintaining the stability of the exchange market directly and not being exposed to future vibrations, and providing flexible mechanisms to deal with any variables that may affect the stability of the foreign reserve when some foreign investments exit. direct.

In press statements, he stressed the importance of the timing of this deposit in reducing the cost of external debt by finding sources of less expensive borrowing, strengthening the ability of the Central Bank of Egypt to confront the inflationary wave in commodity prices in international markets and stock exchanges, and supporting the ability of foreign exchange reserves to secure Egypt's imports of strategic goods.

The priority in the current year’s 2021/2022 budget is to repay debts and their interests in a way that prevents citizens from benefiting from their money to improve their conditions during the crisis they are going through, according to a report by the Egyptian Initiative for Personal Rights (Independent).

Allocations for the interests of domestic and foreign loans amount to about 579.6 billion pounds, or 31% of the total expenditure item in the budget, and loan installments rose to 593 billion pounds, bringing the total installments and interests of debts due in the 2021-2022 fiscal year to about 1.172 trillion pounds (the dollar equals 15.70 pounds). .