Mar 9, 2018

CAIRO — Egyptian Finance Minister Amr El-Garhy claimed in a Feb. 26 press conference that the government's issuance of bonds that month had met with unprecedented success, revealing strong foreign confidence in the Egyptian economy. Egypt raised $4 billion in the debt sale and triggered $12 billion in bids by investors. The high demand and profits from the sale will cover a significant portion of the interest that the government has to pay to the buyers.

Egypt listed the bonds Feb. 14 on the London Stock Exchange, a move that many economic analysts had cautioned against. The Central Bank of Egypt (CBE) received the proceeds from the sale on Feb. 22. Some economic experts deemed the quick sale of the bonds and the large number of bids as a sign of the Egyptian economy's stability, given that the high demand for the bonds led to a drop in their yield and interest. Others, however, believe Egypt will not be able to fulfill its debt obligations, as it is increasingly indebted by the day.

Such concerns were fueled by an agreement signed Jan. 31 by Investment and International Cooperation Minister Sahar Nasr and Hani Salem Sonbol, the CEO of the International Islamic Trade Finance Corporation (ITFC) and a member of the Islamic Development Bank Group. Under the agreement, Egypt will receive $3 billion in loans from the ITFC to finance the purchase of commodities, such as petroleum and its derivatives, and foodstuffs, such as wheat. The ministry's statement about the agreement did not provide details about the loan’s repayment schedule or interest rate.

The CBE announced Feb. 7 that Egypt's total foreign debt had stood at $80.8 billion at the end of December 2017, to which is now added the $4 billion from the London bond sale and the $3 billion ITFC loan. Egypt is also expected to receive the third part of a $4 billion loan from the International Monetary Fund in 2018.

In an interview with Al-Monitor, Wael al-Nahas, an economic adviser to a number of investment institutions, criticized the government’s increasing foreign debt and cautioned that future generations would bear the burden of it. According to Nahas, a sustainable solution to Egypt's economic crisis requires the government to develop its own financial resources — that is, industrial, agricultural and tourist projects to generate income — rather than continuing to borrow money. He warned that the government could plunge into crises due to its reliance on short-term debt instruments, such as bonds, some of which the government has only three months to settle.