External debt has quadrupled in 10 years and is behind a huge jump in interest rates in the country,

Recent data from the Central Bank of Egypt (CBE) shows that the Egyptian government faces repayments of external debt obligations and instalments, of approximately USD42.3 billion in 2024. Last September, Egyptian finance minister Mohamed Maait announced that Egypt was able to pay about $25.5 billion in interest and debt instalments in the first half of this year.

He explained that his country paid a total of USD52 billion in instalments and interest on the financing it owed during the fiscal years 2021/2022 and 2022/2023, adding that they are "the two most economically challenging years the world has ever experienced". Maait pointed out that these repayments were in addition to $23 billion in short-term investments that left Egypt during the past two years.

Egypt will have to repay about $32.8 billion in medium and long term-debt, equivalent to about 20 per cent of the country's total external debts in 2024. This is an increase of USD3.6 billion over the estimates of the CBE last September, an increase in USD29.2 billion in Egypt's debt owed.

In the first half of the year, Egypt will have to repay about USD9.5 billion in debt instalments and short-term interest. The bulk of these debts are scheduled to be paid during the months of February and March of 2024. Egypt's external debt stood at about $164.7 billion by the end of the last fiscal year, representing a reduction of $165.4 billion since last March. However, external debt was $9 billion higher than at the end of the 2021/2022 fiscal year.

Why is Egypt's debt so large?

Regarding Gulf deposits, the UAE extended the maturity of a $1 billion deposit that was due last July, so that its maturity date becomes July 2026. According to the report, the UAE's total deposits with the CBE amount to $5.7 billion.

Kuwait also extended the maturity of a USD2 billion deposit with the CBE that was due in April 2023 by one year. According to the report, Kuwait's total deposits amount to about $4 billion. Local reports indicated last month that the maturity date for another deposit worth $2 billion had been extended to September 2024. The same report pointed out that there is the possibility of Saudi Arabia and the UAE depositing about another $5 billion dollars with the CBE this year.

The International Monetary Fund's (IMF) board of directors is seriously considering increasing the $3 billion loan program provided to Egypt to $5 billion given the economic difficulties the country is facing due to the Israeli war on Gaza.

Meanwhile, the data indicates that there will be more direct foreign investments (DFI) as a result of the sale of state-owned assets, especially as the Egyptian government seeks to increase DFI to $12 billion in the current fiscal year. The government hopes that the asset sale programme will raise about $5 billion by the end of June 2024.

The Egyptian government also plans to secure about $3 billion by the end of the current fiscal year through international bond issues and loans. Egypt has already succeeded in securing half of this amount through a soft loan worth $500 million from Deutsche Bank and Arab Banking Corporation, and a $500 million issuance of Samurai bonds in November. This was preceded by an issuance of $478.7million of Panda bonds in October 2023.

Egypt sought to achieve revenue of $14 billion from the tourism sector in 2023, an estimated increase of about 15 per cent from 2022. The Ministry of Tourism also plans to increase revenues by another 25 per cent this year. In addition to this is the expansion of initiatives aimed at attracting hard currency inflows. This includes recent government initiatives to increase foreign currency inflows into the country by allowing Egyptians abroad to import cars in exchange for depositing customs duties and taxes in advance in foreign currency.

The government has also decided to enable foreign investors to buy land in foreign currencies. It is also launching a separate incentive program for investors that includes tax exemptions, if hard currency is used to finance at least half of the investment cost of industrial projects.

Photo: Egypt has to repay its external debt obligations of about $42.3 billion in 2024. (by Adobe)