Egypt: Parliament approves 3 new loans

The economist, Ahmed Zekrallah, explained that “loans as installments and interest devour a large share of the public revenues of the state. Rather, 90 percent goes to installments and interest and remains 10 percent with periodic and regular obligations such as wages, subsidies, and others.”

According to Zekrallah, “as long as the loans are not directed towards productive projects that bear the burdens of repayment and benefits for future generations.”

Three financing agreements

The Egyptian Council of Representatives approved, during its plenary session, today, Tuesday, three new loan agreements, at a time when the Ministry of Finance announced a 12% rise in debt issuances to 513 billion pounds (32.7 billion dollars) during the first half of the current fiscal year (2019-2020), Exceeding 70% of the target for the entire year.

Parliament adopted Sisi Decision No. 68 of 2020 regarding an agreement to facilitate term financing between the National Railways Authority of Egypt and the Bank of Canada for Export Development, signed on December 12, 2019, under which Egypt will obtain a loan of 226 million euros, under the pretext of developing a sector Railways.

He also approved Al-Sisi’s decision No. 30 of 2020 regarding the approval of a second financing (loan) agreement in the amount of 25 million Kuwaiti dinars, to finance the “accidental road 4” project within the Sinai Peninsula development program, and to amend the first financing agreement signed on March 13, 2018, Between Egypt and the Kuwait Fund for Arab Economic Development, with a total of 17 million and 500 thousand Kuwaiti dinars.

The House of Representatives also approved Sisi Decision No. 29 of 2020, approving the economic and technical cooperation agreement between the Egyptian and Chinese governments, signed in Cairo on November 23, 2019.

High public debt

According to official statistics, the total external public debt due on Egypt increased to 109.363 billion dollars, as of the end of last September, with growth of 17.47% on an annual basis, while the burdens of external debt service increased to about 13.4 billion dollars during the 2018-2019 fiscal year, compared to about 13.25 billion in the previous year.

Since the end of the first half of 2019, the cycle of borrowing from abroad has continued, as Egypt obtained last August two billion dollars, which is the last installment of the IMF loan, and more than one ministry, including social solidarity and the environment, is negotiating with the World Bank to obtain From it on new loans.

Debt drains state resources

In an article in the local newspaper, Al-Shorouk, entitled “Debt … Who benefits and who bears the burden?”, The Egyptian economist at the United Nations, Mahmoud Al-Khafif, revealed the seriousness of the Egyptian position regarding the borrowing policy.

Al-Khafif published part of the report “Trade and Development” issued by the United Nations Conference on Trade and Development (UNCTAD), pointing out that the report warned that the very high debt ratio of developing countries reflects the weak ability to pay in the future and a high possibility of default.

He explained that the Egyptian debt rose from 95 to 118 percent between the fiscal years 2017/2018 and 2018/2019, indicating that “the problem with the Egyptian case is not only that the huge increase in this percentage (more than 23 percentage points) occurred in one year,” according to the UN report.

Egypt: Parliament approves 3 new loans

The Egyptian economist at the United Nations said, “The real challenge that may affect negatively, in the long run, is that government spending on debt interest-only (and not the principal) represents more than 36 percent of government spending in this year’s budget, and it drains half of the government revenue and its value.” Equals one and a quarter times the value of the budget deficit. “

Al-Khafif stressed that “the harm in this is that the largest share of government spending is directed towards paying the debt, and there is little left to increase spending on education, health, social justice and development investments for the future.”

The seriousness of this situation on Egypt

In his answer, the UN economist, Dr. Ibrahim Nawar, said, “This is in fact the most serious consequence of the economic policy of the current government.”

Nawar, in his interview with Arabi 21, explained the severity of the Egyptian stance, stressing that “the debt service growth rate exceeds that of the local economy.”

And he explained, “Then the ability to generate an investment able surplus is drained from year to year, and the economy is deprived of real growth opportunities.”

“In addition, the distortions in the structure of the economy, and the expanded role played by the foreign economic partner, especially in the oil, gas, energy and real estate sectors, and the predominance of consumption growth, leads to a decline in real development opportunities,” the economist said.

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