Domestic debts rise an alarming 27% in Q3 2012/2013

Egypt’s domestic debt hiked to EGP 1.460tn in the third quarter of fiscal year (FY) 2012/2013, compared to EGP1.38tn in the previous quarter, according to the latest reports from the Central Bank of Egypt.

The government’s borrowing in treasury bills surged to EGP 1.211tn, representing 82.9 % of internal debt, while economic institutions’ borrowing reached 4.4 % and those of National Investment Bank amounted to 12.7%.

Debt has risen unprecedentedly since March 2012, reaching EGP 1.089tn, or 80% of the nation’s GDP, the Ministry of Finance said in a report published in March 2012.

Speaking to media, former finance minister Fayyad Abdel Moneim has previously said: “We are considering loans from the central bank at the announced rate, instead of resorting to the treasury bill mechanism at 13%, which will ultimately drop down the general debt.”

Fayyad asserted that this would also restrict monetary printing operations, which could result in the exacerbation of inflation.

Ahmed El-Khouly, head of treasury investment at the Housing and Development Bank attributed the recent rise in internal debts to the absence of investments, inflation and high interest rates.

“We can see looming positive indices after 30 June revolt,” El-Khouly said. “We expect no more exacerbation in internal debt, but no doubt it will take months to recover.”

Osama El-Manyalawy, an investment bank deputy treasury manager, highlighted that the increase in internal debt affects the individual’s share of the GDP, as internal debt has subjected citizens to higher interest rates, which may hold back growth.

Echoing that opinion, economic expert Karim Helal said: “the internal debt is considered much more dangerous than foreign debt.”

Meanwhile, Magdy Tolba, economic analyst and head of Arabian Wise Company for Economic and Financial Consultancy emphasised that record-high external debt also has a severe impact on the economy, pointing out that foreign debts are mainly based on the price of foreign currency, “which is hugely changeable from time to time,” leaving the state vulnerable to market upheavals.

“When the price of the US dollar declined from EGP 7.5 to EGP 6, Egypt’s foreign debts decreased from 30% to 25 %,” he explained.

On the other hand, an official at Arab Investment Bank, Hesham Shawky, said internal debt has no huge impact on the economy compared to foreign debts, and its indices are still under control.

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