Egypt’s average external debt per capita reached $883.9 by the end of June 2018, according to the Central Bank of Egypt (CBE) on Thursday.
The CBE revealed that the external debt jumped to $92.6bn at the end of June 2018 compared to $79.032bn in June 2017, an increase of $13.6bn or 17.2%.
In a recent report, the CBE stated that the external debt to the gross domestic product (GDP) ratio stood at about 37%, stressing that it is still within the safe limits according to international standards.
The report added that the external debt to total goods and service exports reached 195.8% in June 2018. It pointed out that short-term debts are estimated at $12.28bn, accounting for 13.3% of total external debt, while medium and long-term debts scored $80.36bn, equivalent to 86.7% of total foreign debt.
Egypt’s short-term debts represent 27.8% of the net foreign exchange reserves.
According to the CBE, the volume of government’s external debts reached $47.648bn at the end of June 2018, equivalent to 51.4% of the total external debt, and about 19% of the GDP. It noted that the external debt service represents 17.8% of Egypt’s goods and service exports, and about 11.3% of the current proceeds.
The CBE’s external debt is about $26.56bn, while the external debt owed by banks operating in the Egyptian market stood at about $6.046bn, and other sectors’ debts, which were not mentioned by the CBE’s report, amounted to about $12.388bn.
Also, according to the CBE, the external debt’s interest rate amounted to about 3.5% of goods and service exports, and about 2.2% of the current proceeds.
Tarek Amer, the CBE’s governor, previously stated that Egypt’s external debt and its services are not worrisome at all, and Egypt’s financial abilities can absorb more debts based on international indicators.
During a previous statement, Amer declared that the government uses debts to finance development projects.
“For those who say that debts have significantly grown, I say that the economy has comparatively grown and the external debt is not worrisome at all, as Egypt never postponed repaying any of its debts, even in the most challenging situations,” Amer stressed.
“Most of Egypt’s external debts have long maturities, reaching about 15-20 years, with some loans that extend to 60 years,” he elaborated.
According to banking expert Mohamed Abdel Aal, external debts can be measured by two indicators: the foreign debt to GDP ratio, if it was less than 69%, then it is considered safe. For Egypt, it is currently between 34% and 36%.
The second indicator is the external debt to exports ratio. In other words, the ability of Egyptian exports to pay all, or part, of the external debt costs. This ratio in Egypt is gradually improving, especially with the Egyptian exports’ current tendency to grow.
He expected that the external debt will remain stable over the coming years. However, there may be a decline in the external debt to GDP ratio due to the GDP growth, adding that the state targets to maintain external debt to GDP ratio between 30% and 32% during the coming years.
“In my opinion, the risk of external debts will diminish over the time, as the GDP will grow significantly compared to external debt,” Abdel Aal explained.
On the other hand, banking expert Tarek Metwally said that external loans must remain within safe limits and for long maturities in order not to exhaust the state’s budget or the coming generations.
He added that it is necessary to stop external borrowing, and attract direct investment in the coming period, to benefit from the positive results of economic reform. It is also important to investigate the possibility of replacing short-term loans with medium and long-term ones, while maintaining the debt level without further increases.
Metwally also indicated that we should learn from other countries’ negative experiences with foreign borrowing for both the state and banks. They aimed to finance local projects to achieve rapid economic recovery, but they currently suffer from countless problems as a result.