Egypt spent US$20 billion on external obligations during fiscal year 2017/18, which ended on June 30, according to statements delivered by Finance Minister Mohamed Maiet on Sunday during the annual African Governors Caucus meeting.
His comments came in response to press questions regarding concerns of rising foreign debt and potential debt rollover scenarios.
External obligations are often made up of foreign debt and imports of basic commodities, such as wheat and oil, Mahmoud al-Masry, a senior economist at the Cairo-based Pharos Investment Bank, told Mada Masr.
A heavy burden was lifted off Egypt’s external obligations after Saudi Arabia, the United Arab Emirates and Kuwait agreed to renew their deposits in Egypt, worth billions of dollars, and postpone their repayments, significantly reducing the bulk of Egypt’s foreign debt due this year.
On the sidelines of the Sunday meeting, which was held in Sharm el-Sheikh and attended by senior representatives from the World Bank and the International Monetary Fund, as well as African member states of the two institutions, Maiet responded to questions from the media on the reasons behind the decision taken by many Gulf states to renew their deposits at the Central Bank of Egypt (CBE).
According to the newly appointed minister, the Gulf countries requested a renewal of their deposits to benefit from Egypt’s interest rates, which remain undisclosed, as Maiet refused to respond to questions on whether or not the Gulf states’ decision to renew came with higher interest rate offerings from the CBE. Maiet also noted that Egypt’s ability to pay off all of its external obligations on the date they are due is a sign of the country’s foreign currency abundance.
Egypt’s government paid off over $9 billion in external debt in FY 2017/8,which includes instalments to the Paris Club, an informal group of creditor countries, $3 billion in oil arrears, more than $3 billion to The African Export-Import Bank (Afreximbank) and $1.25 billion to the World Bank, among others, Masry said.
The economist added that financial support from Gulf states is the reason behind Egypt’s ability to pay off its external debt on time
“There is a positive indication in the fact that Egypt did not miss any of its due obligations, including interest rates and loan instalments, and this is what matters to credit agencies,” said Masry.
However, he warned that despite Egypt’s promising ability to repay its foreign obligations on time, “external debt in Egypt is currently very high and this is a dangerous indicator.”
Egypt has entered into what is commonly referred to as a debt rollover scenario, where old debts are financed through older debts. According to Masry, the impact of this problem is likely to be felt in the future.
Total external debt in Egypt stood at $82.88 billion at the end of December 2017, an increase from $67.3 billion at the end of December 2016.