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Tuesday, 12 October 2021

Egypt’s external debt is still growing (thank you, covid), but at a slower pace than before

Egypt’s debt is growing, but the pace of growth slowing, says the WB: Egypt’s external debt grew 14.3% y-o-y to USD 131.6 bn in 2020, up from USD 115.1 bn in 2019, according to the World Bank’s International Debt Statistics 2022 report, which came out today. That said, the data shows a marginal slowdown in the annual growth of Egypt’s external debt, continuing a years-long downward trend in the pace of acceleration. External debt was up 14.9% y-o-y in 2019, after growing 18.3% y-o-y in 2018, and 22.5% y-o-y in 2017.

It was about covid, stupid: While IMF loans to Egypt were up 55% y-o-y in 2020 to hit USD 20.4 bn, according to the report, these were largely due to emergency pandemic loans. The report refers to the USD 2.8 bn rapid financing instrument (RFI), disbursed in May 2020 to help Egypt support its balance of payments amid the pandemic. We also received USD 3.6 bn in 2020 of the one-year USD 5.2 bn standby loan approved by the IMF. As for eurobonds, the government tapped the bond market with a USD 5 bn eurobond issuance in May last year. And then there were all the other forms of loans secured by both the government and the private sector to sustain us during the pandemic year, including fiscal assistance loans, development loans, sukuk, green bonds and securitization.

FDI also suffered, but but what did you expect of a global pandemic and subsequent meltdown? Fresh FDI into Egypt tumbled 35% to USD 5.9 bn in 2020, down from USD 9 bn in 2019 — its lowest recorded level since 2014. That comes “despite concerted efforts to promote diversification of FDI” in Egypt, including attempts to revive the long-dormant USD 16 bn Saudi-Egypt investment fund, according to the report. It added that Egyptian FDI remains highly concentrated in oil and gas.

Our debt and FDI levels, however, were worse than the MENA average: External debt across the MENA region increased 8.5% to USD 370 bn in 2020, up from USD 341 bn, while Meanwhile, FDI inflows to MENA fell 16 percent on average to USD 14.3 bn, down from USD 16.9 bn a year before, amid a regional slowdown in investment.

Low and middle-income countries were forced to dig their debt hole deeper: External debt among poorer nations increased 5.3% to USD 8.7 tn in 2020, as they tried to head off the pandemic with massive emergency stimulus measures. The average increase in external debt among low and middle-income countries excluding China stood at 3.4%. Elevated levels of debt put emerging-market economies in a risky position, according to World Bank Group President David Malpass. “We need a comprehensive approach to the debt problem, including debt reduction, swifter restructuring and improved transparency,” he said in a press release accompanying the annual report.

You can find the report on the landing page here or download the full 207-page report here (pdf).


IN OTHER DEBT NEWS- Local sukuk issuances in 2021 are forecast to reach EGP 7.5 bn by the end of the year, head of the Financial Regulatory Authority’s financial instruments department Sayed Abdel Fadeel told Al Borsa. According to Abdel Fadeel, EGP 5 bn-worth of issuances are expected to hit the market before 2022 rolls around, bringing the total for this year up three-fold. Only one company, Contact Financial, has issued sharia-compliant debt since the start of the year. Planned offerings we know of include an EGP 5.5 bn sale for Palm Hills Development, an EGP 3 bn issuance for Hassan Allam Properties, and an EGP 1.1 bn offering for Amer Group. Wadi Degla Developments over the summer also revealed plans for a sukuk issuance worth some EGP 2 bn through Contact.

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