Egypt’s external debt increased by $16bn to $108.7bn in fiscal year (FY) 2018/19, from $92.6bn in FY 2017/18, up 17.3%, the Central Bank of Egypt (CBE) said.
The government’s share of external debt reached $57.3bn, while the CBE owed $27.98bn, banks operating in Egypt were $9.5bn in debt, and other sectors owed $13.92bn.
In general, the country’s external debt-to-GDP ratio was 36% in FY 2018/19, while it was 48.7% in Latin America, and 47.5% in the Middle East.
The short-term debt reached 10.2% in Egypt, 14.2% in Latin America, and 21.3% in the Middle East and Central Asia.
The external position report of the Egyptian economy was produced by the economic research sector in the CBE. The report tracked on a quarterly basis the international transactions that the Egyptian economy conducted. It relied, for this purpose, on the national statistics that are regularly compiled in line with the International Monetary Fund’s (IMF) Special Data Dissemination Standard (SDDS) prescriptions.
The CBE report said the external debt increased to $108.7bn in FY 2018/19 – of which $12bn recorded in the first half – up 17.3% compared to FY 2017/18. This increase came as a result of the rise in net disbursements of loans and facilities by $16.5bn, while most currencies of borrowing depreciated against the US dollar by $0.4bn.
Breakdown by Maturity
The CBE noted that according to original maturity, external debt reaffirmed its usual pattern of long-term external debt predominance at the end of June 2019.
It explained that the long-term external debt accounted for $82.4bn or 75.8% of the total external debt, whereas medium-term external debt reached $15.2bn or 14%, and short-term external debt accounted for $11.1bn or 10.2%.
Moreover, by residual maturity, short-term debt accounted for 21.2% of the total external debt in FY 2018/19, compared to 10.2% classified by original maturity.
Meanwhile, medium and long-term external debt represented 78% of the total debt, in comparison to 89.8% by original maturity.
Breakdown by Type
The CBE said the medium and long-term external debt increased by about $17.3bn to about $97.6bn (89.8% of total debt) at end of June 2019, up by 21.5% compared to June 2018. This change was driven by several developments, including bonds issued abroad (non-resident holdings) reaching about $19.4bn, up by 35.7%. These holdings include about $0.9bn of sovereign notes issued in April 2010 and falling due in 2020 and 2040, as well as about $14.1bn of Eurobonds issued in USD, in June 2015 (falling due in 2025), January and May 2017 (falling due in 2022, 2027, and 2047), February 2018 (falling due in 2023, 2028, and 2048), and February 2019 (falling due in 2024, 2029, and 2049).
The bonds also include about $4.4bn of Eurobonds denominated in euros, issued in April 2018 and falling due in 2026 and 2030, and April 2019 falling due in 2025 and 2031.
Furthermore, multilateral institutions’ debt reached about $32.8bn, up by 15.5%, while re-purchase agreements (Repo) recorded $3.8bn at the end of June 2019 and buyers’ and suppliers’ credit reached about $11.3bn, increasing by 33.8%.
The report noted that other bilateral debt amounted to about $9.6bn, up by 26% compared to June 2018 and rescheduled bilateral debt reached about $3.1bn, down by 16.1%.
The long-term deposits that had been placed at the CBE by some Arab countries fell slightly to $17.2bn, down by 1.1%, non-guaranteed debt of the private sector registered $0.4bn, down by 11.2%, and short-term external debt decreased by about $1.2bn to about $11.1bn or 10.2% of total debt. Its ratio to net international reserves decreased to 24.9% at end of June 2019 against 27.8% at end of June 2018.
Measuring the currency composition of external debt was an important indicator that sheds light on its exposure to currency markets’ volatility, the CBE said.
The currency composition of Egypt’s external debt indicated that the US dollar is the main borrowing currency, with a value of $69.4bn, including other outstanding obligations in US dollar to creditors other than the USA such as international institutions.
Other important currencies recorded $39.3bn, including the euro by $16.3bn as the runner-up, followed by Special Drawing Rights ($12.2bn), Chinese yuan ($3.6bn), Kuwaiti dinar ($2.6bn), Japanese yen ($2.5bn), and other currencies ($2.1bn).
Breakdown by Creditor
Debt distribution by creditor country showed that $32.8bn was owed to multilateral institutions, mainly the IMF ($11.2bn), the European Bank of Reconstruction and Development ($10.6bn), the European Investment Bank ($3.2bn), and African Development Fund and African Development Bank ($3bn).
Moreover, $23.5bn was owed to Arab countries, mainly Saudi Arabia (8.3%) of total external debt, the UAE (8.1%), and Kuwait (5%).
Besides, $9.4bn came from five members of the Paris Club, namely Germany ($3bn), Japan ($2.5bn), France ($1.5bn), USA ($1.3bn), and UK ($1.1bn). In addition, $6.5bn of the total debt was owed to China.
Breakdown by Debtor
The structure of Egypt’s external debt by debtor revealed the government was still the main debtor, with a share of 52.7% of external debt in FY 2018/19, up $9.6bn compared to FY 2017/18, reaching $57.3bn.
The CBE’s share of external debt increased by about $1.4bn to $28bn, while banks operating in Egypt owed $9.5bn ($3.5bn rise), and other sectors’ debt surged by about $1.6bn to $13.9bn.
External Debt Service
The CBE said the debt service was $13.4bn in FY 2018/19, compared to $13.3bn in FY 2017/18. This increase was mainly due to the rise in paid interest by about $1.1bn to $3.2bn.
However, repayment of instalments slightly decreased by about $0.9bn to $10.2bn.
As for the external debt in terms of international comparison, the report said that Egypt’s debt remained within manageable limits. Based on IMF classification, Egypt’s key debt indicators compared to those of other regions showed that Egypt’s debt stock to GDP represented 36% in FY 2018/19 against 48.7% in Latin America and the Caribbean, and 47.5% in the Middle East and Central Asia.
Moreover, Egypt’s short-term external debt to total external debt represented 10.2% against 14.2% for Latin America and the Caribbean, and 21.3% for the Middle East and Central Asia.
Egypt’s debt service ratio registered 25.3% compared to 46.4% for Latin America and the Caribbean, and 23.1% for the Middle East and Central Asia.
Exchange Rate Developments
On 3 November 2016, the CBE decided to liberalise the Egyptian pound’s exchange rate, to be quoted according to the dynamics of supply and demand. This decision came as part of the economic reform programme.
The CBE said the weighted average of the US dollar in the Egyptian inter-bank market depreciated by 6.6% to EGP 16.7057 in FY 2018/19, against EGP 17.8878 in FY 2017/18.
According to the foreign exchange market (buying price), all currencies depreciated versus the Egyptian pound, including Chinese yuan by 10.0%; pound sterling by 9.3%; euro by 8.3%; Kuwaiti dinar by 6.8%; US dollar, Saudi riyal, and UAE dirham by 6.6% each; Swiss franc by 4.7%; and Japanese yen by 4.6%.
Net International Reserves
“As the gains of the reform programme became clear and the foreign exchange resources increased, the CBE decided on 4 December, 2018 to terminate the Repatriation Mechanism for any new foreign currency portfolio investments,” the CBE said.
In FY 2018/19, the net international reserves (NIR) increased by $0.2bn, against an increase of $13bn a year earlier, to reach $44.5bn, thus covering eight months of merchandise imports.
The increase was a result of the rise in foreign currencies by $2.3bn and of gold by about $0.2bn, and the decrease of SDRs by $2.3bn.
During the preparation of the report, the NIR reached $45.4bn at end of November 2019, according to the CBE.
The CBE said the banks’ net foreign assets increased by $1.7bn in FY 2018/19, against a decline of around $2.7bn a year earlier.
Meanwhile, foreign currency deposits with banks increased by 6.8% during the period concerned, reaching $42.9bn at end of June 2019.
Likewise, local currency deposits increased by 15.8%. As such, the ratio of foreign currency deposits to total deposits made up 21.2%.
International Investment Position
The report noted that Egypt’s International Investment Position (IIP) at end of June 2019 recorded net external liabilities (assets minus liabilities) of about $166.3bn, up by 12.9%, compared to $147.3bn at the end of June 2018.
The increase in negative net IIP came as a result of the slight increase in Egypt’s total assets versus the increase in Egypt’s total liabilities compared to the end of June 2018.
Assets and Liabilities by Component
“Assets increased by 3.8% to reach about $81.2bn at end of June 2019, from about $78.2bn at end of June 2018, driven by other investment assets increasing by about 10.5%, to reach about $28.4bn,” the CBE said.
It noted that foreign direct investments (FDI) increased by 4.9% to about $7.9bn, while reserve assets increased by 0.8% to about $43.9bn.
However, portfolio investments abroad decreased by 32.4% to about $1bn.
Liabilities increased by 9.8% to about $247.5bn at end of June 2019, from about $225.5bn at the end of June 2018.
The CBE attributed the increase due to portfolio investments in Egypt increasing by 15.6% to about $38.8bn and other investment liabilities increasing by 14% to about $89.3bn, in addition to FDI in Egypt increasing by 5.1% to about $119.4bn.
Finally, the CBE said that Egypt’s negative net IIP to GDP decreased to about 55% at end of June 2019, from about 58.9% at end of June 2018. While, Assets to liabilities decreased to about 32.8% from about 34.7%.