-John Maynard Keynes
Here is Egypt’s Sovereign debt - the debt which is admitted publicy.
But this Sovereign debt is being increased on the international markets every month or so.
As a percentage of GDP its considerably higher than Jordan and hugely higher than Indonesia, Turkey and India. (Good that Egypt’s debt is in good hands. Its also good that Egypt's economy and tax base is better managed than these dreadfully mismanaged and collapsing places that use their debt for useless national symbols with no economic purpose
.)Of course all this debt is a sin against Islam because interest is paid on it in nor-Koranic terms. Al Azhar should be asked to denounce it or, more realistically, change their Koranic teachings to catch up with the last 500 years. The religiously devout President could be asked whether he is a heretic or whether he rejects this part of Islam. What do you think the chances of either happening - facing up to reality.
Its increased by 41% in one year (I suspect it has increased by more) and is arguably not sustainable given Government tax revenues, hidden debts, poor management and low growth. In addition a deal of the debt has been wasted on prestige projects or purchases. The rate of increase also implies there is a frenzy in government and that choices for the debt usage not carefully considered.
The $US20 billion in short-term high-yielding Egypt Treasury Bills should probably be added to the above figure. https://www.bloombergquint.com/onweb/20 ... -the-float
The international Bills have high interest rates (17%) of payable in international currency so that makes them very expensive to the Egyptian taxpayer.
Most sovereign debt is not raised by the Government of Egypt but by the Central Bank. This is very unusual but means that Parliament and debate and media scrutiny is excluded and interest rates and conditions largely hidden. Cabinet is probably excluded but I can't be certain. I wonder why. To describe the Central Bank as a well run organization independent of government would not be right – although the IMF thinks well of its governor and this confirms my dark view of both. Raising debt in this was also means there is not disclosure of the purpose of the debt and therefore no accountability for its actual use. http://en.qantara.de/content/egypts-ris ... nopaging=1
Its likely some debt is used to fill the big gap between tax revenues and day to day government expenditure which is a really bad approach. Its impossible to know because of the Central Bank secrecy and the laughable budget documentation.
Debt is not a problem if its invested in money making projects or infrastructure that will help companies make money and create jobs but a lot of this debt has previously gone into military hardware, the new capital and other high status projects that will not make money.
Debt could go to useful purposes including purposes which would benefit millions. For example the school system is unreformed, indeed there are not even plans to reform it, and the basic infrastructure of the country, with the possible exception of Cairo, is not in good shape. Unemployment is still critical and the government figures on this from CAPMAS probably understate it.
In the last few years government expenditure on health and education has actually reduced – but this gets no attention in local media or even from politicians. http://en.qantara.de/content/egypts-ris ... nopaging=1
Rather I think fixing deep problems like Education is seen as long term and low priority (to getting elected and satisfying the power group that send their kids to private schools) whereas the government would prefer a quick theatrical shopping spree of finished objects, often military, that can be displayed instantly. Much of these spends are also self-serving - to put it mildly.
Probably hidden in these figures are the debts of the Government to the Egyptian banking system. Figures are deliberately hidden but at least half of the bank loans in Egypt are to the government or its appendages (this explains in part why civilians find loans hard to obtain). The several billion owed to oil companies for previously supplied oil is probably not included. Whether the ten billion for the nuclear plant and the unspecified debt for the ‘world’s largest desalination plant’ is included in table 1 not clear but my guess is that it isn’t.
It’s a situation where anything nasty could tip the load. For example the current surge in oil prices. https://thearabweekly.com/egypt-faces-b ... oil-prices
The massive increase in National Reserves can’t all be coming from capital inflows so maybe a deal of the debt is just funneled into the Central Bank Reserves and sits there doing nothing.
I don’t think the public debt includes the ‘gifts’ from the Gulf and Saudi, which are in the10’s of billions, and its hard to know whether these ‘donors’ expect their money back.
Paying debt back isn’t a problem if you export more than you import but Egypt has been in the negative in this for ages.
Its clear that the capital spending is principally by the state – with all the problems that go with that – because the capital inflows which have increased but fluctuate in an odd way are often speculative or for the Stock Exchange:
If tourism kicked off the debt might be manageable – in the long term – but that may not happen – the Russians have yet to arrive and terrorism is unresolved and maybe worse. The problem is that a lot of the debt is one year (20%) and none longer than five year. (this has changed dramatically in six years – previously it was much more long term) The effect is that a deal of debt is rolled over, possibly because it is hard to repay the capital. They need the money short term - in many cases.
If there wasn’t a large and persistent budget deficit by the State they might pay back the debt.
Here is a terrorism index for the past 10 years which indicates the Government is not managing this well - specifically one President:
If a military government can't manage it one imagines a civilian government would be ten times worse - or better.
And here are the tourism arrivals:
The source for the above is Egyptian military controlled CAPMAS statistical agency - I don't believe them. The figures don't show duration - which I guess has shortened. The figures don't show average spend which I guess has dropped. The figures also don't show that world tourism has exploded in the past 4 years as economies have recovered from 2008 and as the Chinese have entered the market in enormous numbers. Therefore even if Egyptian tourism numbers recovered to 2010 levels that would put them massively behind in comparative terms in a world market that has hugely grown in numbers and in average spend.
A US Government study on the last debt Egyptian crisis in 1990: http://countrystudies.us/egypt/104.htm Off topic but interesting because everything repeats itself in some places.
A thoughtful local article on why economic indicators give a poor picture on human well-being: https://www.madamasr.com/en/2018/02/06/ ... egyptians/
It looks like a dangerous shopping/debt spree to me with unclear/absurd objectives – but the Gulf continues to buy debt, the IMF coos and the rating agencies are OK but the IMF and ratings agencies missed the 2008 train crash so they are far from perfect. In an earlier intervention the IMF and World Bank 'fixed' Egypt but only an idiot would believe that.
In any Event Keynes is wrong in infallible Egyptian terms and all his books should be burnt - because of his perversion and debauchery. Egyptian economics is perfect and is better by being purged of all decadent Western influences - but not the pure Western dollar.
