The size of the Egyptian external debt reached regarding 158 billion dollars (Getty)
face Egypt repayment crisis Financial dues and obligations up to $ 30 billion during the current year, in light of the limited options available so far to provide foreign exchange.
The Egyptian economic expert, Hani Genena, said in media statements on Saturday evening that were published by local newspapers and websites today, Sunday, that the state is obligated to pay $30 billion, starting from last July, until the end of this year.
Geneina indicated that the amount is divided into 20 billion dollars in debts that must be paid, and 10 trade deficits between exports and imports.
Limited options
In the past years, Egypt has resorted to several options to pay off its debts and external obligations, such as borrowing from countries and international institutions, issuing bonds and treasury bills, and obtaining deposits from Gulf countries.
Egypt’s negotiations with the International Monetary Fund have slowed down to obtain a new loan estimated by foreign economic agencies at regarding 15 billion dollars, which was denied by the Egyptian Ministry of Finance.
A delegation from the Fund concluded its visit to Cairo last July 7. The Fund did not disclose the details of its negotiations in Egypt during the visit, which lasted regarding two weeks.
But a few weeks following the visit, the Governor of the Central Bank of Egypt, Tariq Amer, announced his resignation, which indicates differences that occurred during the negotiation process, amid reports of demands from the Fund for more flotation of the Egyptian pound, which lost regarding 22% of its value since last March until Its exchange rate reached regarding 19.2 per dollar, from 15.70 pounds on March 20.
And at the end of last July, the International Monetary Fund said that Egypt needs to make “decisive progress” in financial and structural reforms, noting “the continuing fragility of Egypt’s situation due to the high public debt burden and the large overall financing requirements.”
In the last six years, Egypt obtained 3 loans from the International Monetary Fund, the first in 2016 worth $12 billion to finance an economic reform program, and the second with a value of $2.77 billion to face the repercussions of the Corona pandemic, and it was supplemented by a third loan of $5.2 billion within the credit readiness program.
bond crisis
Egypt’s loans from the Gulf countries also declined, which shifted from the policy of lending and deposits to promises of investments, or some of them tended to renew the term of deposits, some of which turned into loans.
As for the issuance of bonds, and despite the expectations of the “Standard & Poor’s Global” global credit rating agency, in a report last April, that Egypt would sell bonds worth $73 billion during the current year 2022, this option also faces several obstacles, most notably fear Investors from Egypt’s inability to pay its value and then resort to selling it, the high interest on Egyptian bonds, and the continued exit of hot money from Egypt.
Egyptian government bonds saw selling in international debt markets last Wednesday, following the central bank governor unexpectedly resigned, with declines ranging between 0.6 and 1.7 cents per dollar, and many of the country’s long-term bonds saw the biggest moves.
According to “Archyde.com”, concerns regarding Egypt’s debt levels led to some of its bonds dropping to less than half their nominal value in July.
The Central Bank of Egypt data last Monday also showed that the exit of foreigners from Egyptian treasury bills (hot money) continued in May following the Ukrainian crisis and fears regarding raising US interest rates prompted foreign investors to benefit from their holdings.
The Central Bank said that foreign-owned treasury bills fell during the month by 30 billion pounds, at a value of 1.61 billion dollars at that time, to 150.5 billion pounds.
Many investors were also concerned that emerging markets would be more vulnerable to any shock waves from the disruption to trade with Russia, including the resulting increase in the prices of some primary commodities.
Accelerate the sale of assets
In light of this situation, Egypt resorted to the most difficult option, which is selling assets in exchange for debts, as Egypt offered Gulf and Western countries to replace its debts with assets, in an indication of the inability to repay debts, whose service amounted to regarding 102.5% of its budget revenues for the fiscal year 2022-2023, which began the first last July.
On June 14, Egyptian President Abdel Fattah El-Sisi called on Saudi Arabia and the UAE to transfer their deposits with the Central Bank of Egypt to investments in Egypt.
Egypt is also currently negotiating with China with the aim of exchanging 8 billion dollars of debts owed to China with Egyptian strategic assets from ports and airports.
A Western diplomat in Cairo revealed, in previous statements to Al-Araby Al-Jadeed, that the Egyptian government “has started undeclared negotiations with some European countries, led by Germany and France, with the aim of exchanging debts owed to it with assets owned by the Egyptian government, and other companies, some of which are owned by the armed forces.” .
The Western diplomat, who asked not to be named, said that negotiations with some European capitals are “still in the preliminary stage.”
The difficulty of this option is the limited assets, whatever their size and in light of national security restrictions on the sale of some of them, it remains a depletable resource.
As for the worst, selling assets to creditors is almost a declaration of bankruptcy, and therefore the one who determines the price is the creditor and not the debtor seller, which underestimates the price of the sold asset, especially if it is making profits.
The size of the Egyptian debt amounted to regarding 158 billion dollars at the end of last March, according to a report issued by the World Bank at the beginning of last July. Egypt is committed to paying foreign debts worth $33 billion in one year from last March until next March, according to the same report.
A recent report by Standard & Poor’s Global revealed that Egypt’s total sovereign debt is expected to reach $391.8 billion by the end of this year, down from $184.9 billion in 2017.
Data issued by the Central Bank of Egypt also showed a decline in foreign exchange reserves during the first seven months of this year, by regarding 7.8 billion dollars, to reach 33.14 billion dollars at the end of July, compared to 40.93 billion dollars at the end of last December, a decrease of It is 19%.
And at the end of last March, the United Nations Conference on Trade and Development (UNCTAD) stated in a report that Egypt is subject to a sudden shock due to a combination of large refinancing pressures and a high debt service ratio, along with Sri Lanka, Pakistan, Mongolia and Angola, calling for urgent action regarding The debts of poor countries weakened by the war in Ukraine, and the accompanying rise in food, fuel and fertilizer prices.