Egypt has high external debt but it's within safe limits, the Ministry of Finance says

Are Egyptian debts affected by the significant losses of the country's pound against the US dollar? Ahmad Abdel Rahman explains.

Analysts have said that the successive losses of the Egyptian pound against the US dollar does not affect Egyptian debts. This is because these debts are denominated in hard currency, rather than in local currency.

While the Central Bank of Egypt (CBE) continues its moves to contain the crisis and provide dollars to importers, the currency exchange market in Egypt is witnessing instability. This instability is due to the continuous fluctuations of the exchange rates. This is also because the dollar exchange rate at the Central Bank of Egypt and banks operating in the Egyptian market is stable at EGP 24.60.

There is speculation the leaders of the (CBE) are in continuous meetings to work out the best way to get out of the difficult impasse, especially because goods continue to accumulate at Egyptian ports. This is also a funding gap that is estimated to be USD 16 billion, according to statements by the Egyptian Finance Minister Mohamed Maait.

Debts continued to rise in the first quarter

The data indicates that Egypt's external debt rose to USD 157.8 billion at the end of the first quarter of this year, compared to about USD145.5 billion in December of last year, an increase of 8.1 per cent. The World Bank showed in a previous report that this increase in external debt is a result of goverment debt rising to USD 41.9 billion compared to USD 27.8 billion in 2021 However, short-term deposits rose to USD15.837 billion in August 2022, compared to USD 2.822 billion at the end of December 2021.

The total short-term external debt doubled to USD26.4 billion at the end of last March, compared to about USD12.8 billion last December. Saudi Arabia deposited USD5 billion dollars with the Central Bank of Egypt last March. Fitch Ratings said that the UAE also deposited USD3 billion. Gulf deposits provide an important source of financing to Egypt, in light of the wave of foreign investments exiting from local treasury bills and bonds.

According to the data, the government's public debt declined to about USD83 billion at the end of the first quarter of 2022, compared to about USD 85 billion in December 2021. In contrast, bank debt rose to USD17.4 billion in 2022 -compared to USD 17.1 billion in 2021, and on other sectors such as health, education, and industry to USD 15.4 billion compared to USD 15.1 billion

The debt-to-GDP ratio is within safe limits

In recent statements, the Egyptian deputy minister of finance, Ahmed Kojak, stressed the importance of measuring external debt and the state's ability to pay off that debt. Its percentage of GDP is 34 per cent. He says this remains safe and that a percentage above 50 percent is disturbing.

During a seminar at the American University in Cairo, Kojak confirmed that Egypt's external debt remains within safe limits, and the state will work to reduce that percentage to less than 30 per cent during the coming period. He also explained that the volume of government external debt served by the Ministry of Finance represents only about 40 per cent of the total Egyptian external debt, amounting to USD82 billion.

Kojak explained that the government's external debt serviced by the Ministry of Finance represents only about 40 percent of Egypt's total external debt, which amounted to USD 82 billion. These sums and government indebtedness have been used over the past years and decades to finance budget needs. As for the remainder of the amount of external indebtedness, it represents loans and indebtedness to the Central Bank and the rest of the economic bodies, government agencies and agencies, as well as banks and other economic sectors, including the private sector.

Kojak said that the main challenge is how to ensure the ratio of government indebtedness to GDP and the size of the Egyptian economy on an annual basis continues to reduce. He pointed out that one of the positive things about the Egyptian government's indebtedness is that about 62 per cent of it is on a fixed interest rate. As is the case, internationally, this protects the external debt-servicing bill from the risks of high interest rates. Since the average life of external debt is close to 10 years, the fixed rate is positive.

Payment of installments and interest at a value of USD 6.25 billion

The bulletin issued by the CBE showed that the Egyptian government was able to pay foreign debt installments and debt interest of USD6.25 billion during the last quarter of the fiscal year ENDING DECEMBER 2021. The total amount paid by the Egyptian government in terms of debt interest and installments on foreign debt amounted to about USD26.2 billion during the past fiscal year 2021/2022.

The data shows that debt service burdens were divided into installments of USD5.05 billion and interest of USD1.2 billion during the last quarter December 2021. The CBE showed that USD21.7 billion in loan installments were paid during the entire fiscal year, as well as USD4.5 billion in interest paid on loans.