The observer of the Egyptian economic affairs has become confused. He asks logical and urgent questions and does not find an answer to them. Among these questions: What is the secret of the Egyptian government’s insistence on grabbing all these foreign loans during close periods of time, and why the insistence on borrowing billions of dollars from abroad at the same time? In which the country suffers a decline in foreign exchange earnings, especially from the vital tourism sector?
What is the urgent need to borrow billions of dollars to finance the construction of skyscrapers, high-rise towers, the largest mosque in the region and the largest opera house in the Middle East, or even to finance a high-speed train that serves primarily major investors, businessmen, privileged and white collars, Marina pioneers, El Alamein, the North Coast, Ain Sukhna and the capital’s residents? The new administration?
What is the importance of these projects to the citizen, the economy and development plans, and what is the harm in delaying them for some time if they represent a severe strain on the country’s foreign exchange reserves and put pressure on the local currency and the citizen accepts it?
What is the urgent need to borrow billions of dollars to finance the construction of skyscrapers, high-rise towers and the largest opera house, or even to finance a high-speed train that serves the privileged, the pioneers of the North Coast, Ain Sukhna, and the residents of the Administrative Capital
Does the government realize that the citizen who alone bears the burden of the cost of external loans has become moaning, especially with the jumps in the prices of goods and services, the erosion of his purchasing power and the low incomes compared to price inflation?
Does the government realize that the poor, led by state and public sector employees, are the ones who bear the brunt of the external debt, as taxes are deducted from their limited income or from their daily sustenance, and they pay from “live meat” a value-added tax equivalent to 15% of the price of sugar, oils, tea and commodities The basics that they buy, in addition to government fees that increase in value day by day that are imposed even on burial permits and parking on the street?
The observer of the movement of Egypt’s external debt finds that it is constantly increasing despite previous promises to the government to reduce this type of debt, and not to borrow except for specific purposes, and for projects that generate returns in foreign exchange through which debt burdens are repaid, but these promises have evaporated and gone unheeded.
The observer of these types of loans will find that the government is innovating the methods and tools through which it obtains funds from abroad, the latest of which is the offering of sovereign bonds, sovereign green bonds and Islamic bonds. Perhaps tomorrow we read about offering red bonds directed to the markets of China and Russia, and Gulf bonds aimed at obtaining loans from countries. oil.
The observer of the time period finds that the government shortened the times and burned the distances. After during the days of the Nasser, Sadat and Mubarak regimes, they obtained one external loan every years, the period was shortened to a loan every year, then every half a year, and now the period has been reduced to weeks and perhaps days, and it may come The day when we count loans on the femtosecond scale, especially with their magnitude and speed of obtaining them, and the government’s treatment of them as one of its achievements, even though all countries of the world treat loans as a burden for current and future generations, and the burdens of those debts may plunge the country into countless crises, and what is an example Lebanon, Greece and Argentina are far from us.
The government is innovating the methods and tools through which it obtains funds from abroad, the latest of which is the issuance of sovereign bonds, green bonds and Islamic bonds.
This is evidenced by what the government did a few days ago. During a period of time not exceeding two weeks, the government announced several loans worth more than $5 billion. The first loan was worth $3 billion and was obtained on September 23, 2021 in the form of international bonds, and days did not pass until the loan was announced. On October 7, the Ministry of Finance announced that Emirates NBD Capital and First Abu Dhabi Bank had chosen to arrange a deal to obtain loans worth two billion dollars by offering green and Islamic bonds. A few days before that, Finance Minister Mohamed Maait said, His country is about to issue its first sovereign sukuk, worth $500 million.
Since the beginning of this year, the government has been racing against time to borrow from abroad. In one month, last February, it borrowed $3.8 billion from selling dollar-denominated bonds from international markets. In addition, loans from the International Monetary Fund amounting to $20 billion have been obtained since the end of 2016.
It seems that the government is fond of the first number, so it decided to issue the first sovereign green bond offering in the Middle East and North Africa, at a value of $750 million for a period of five years, at an interest rate of 5.25%.
The matter does not stop at direct government loans, as there are other dollar loans obtained by state-affiliated banks, the latest of which is Banque Misr obtaining the largest foreign loan in its history worth one billion dollars on September 23, the day the Ministry of Finance obtained another loan of 3 billion dollars. It is noteworthy that the proceeds of the loan obtained by Banque Misr will be used to repay an old financing that the bank had obtained in December of 2018, about 550 million dollars, and other public banks also obtained international loans.
With the government’s uncalculated expansion of borrowing, Egypt’s external debt rose by $14.3 billion during the fiscal year 2020/2021 to reach $137.85 billion at the end of June.
With the government’s uncalculated expansion of borrowing, Egypt’s external debt rose by $14.3 billion during the fiscal year 2020/2021 to record $137.85 billion at the end of June 2021, compared to $123.490 billion at the end of June 2020, an increase of 11.16%. The increase in the external debt in the last quarter of the fiscal year amounted to $3.02 billion from its level of $134.84 billion in last March.
And the last figure of the external debt announced by the Central Bank of 137.85 billion dollars does not include other loans obtained by the country in the first quarter of the new fiscal year 2021-2022, including 3 billion in the form of international bonds, meaning that Egypt’s foreign debts currently exceed 140 billion dollars.
Some people ask: What is the secret behind the insistence of countries, financial institutions, investment banks and financial funds to lend Egypt all these billions of dollars?
The secret lies in two things. The first is that the high interest rates that the government gives to the lenders. In the last loan I got on September 23, it gave an interest rate of 5.8% on loans with a term of 6 years, 7.3% for 12 years and 8.75% for 30 years, and the US economic agency “Bloomberg” said earlier that Egypt It is now paying the highest interest rate in the world on dollar loans. As for the second matter, it is related to Egypt’s commitment to pay the debts owed by it on the specified dates and not to be late.
The danger of the government’s continued expansion of external borrowing does not lie in mortgaging the state’s economic decision to international creditors who may interfere in determining aspects of public spending for the Egyptian budget and force the government to implement violent austerity measures against the citizen, to carry out continuous price increases and reduce government subsidies.
But there are other risks that lie in the pressure on the Egyptian pound and foreign exchange reserves, and the state’s rotation in a vicious circle that pushes the government to obtain new loans to repay existing ones, in addition to overburdening the budget and with it the constant pressure on the citizen, and perhaps at a later time the citizen will be given the choice between obtaining support or repaying external debts.
The World Bank database revealed that Egypt is required to pay more than 40 billion dollars during the current year, including 15.78 billion dollars in the first quarter.
The World Bank database revealed that Egypt is required to pay more than 40 billion dollars during the current year, and according to the bank, the country is required to pay 15.78 billion dollars during the first quarter of the current fiscal year, and 7.5 billion dollars during the period from the current October to December / next December, and $8.49 billion during the first quarter of 2022, and $8.74 billion during the second quarter of the year, with total balances due during the year from June 2021 to June 2022 amounting to $40.5 billion, representing Gulf deposits, which are renewed continuously, or a significant part of it.
40.5 billion dollars, or about 636 billion pounds, Egypt is required to pay it during the current fiscal year 2021-2022, so what is left of the state’s revenues, its general budget and the proceeds of its taxes to pay basic items, including salaries, support, education, health, defense and security allocations, financing public services and infrastructure investments?