Egypt’s external debt registered $145.5bn in December 2021, up by about $7.7bn, compared to June 2021.
Despite the rise in net disbursements of loans and facilities by $9.1bn, the depreciation of the other currencies comprising the external debt exchange rate vis-à-vis the US dollar, led to a decrease of $1.4bn in book value.
This came in “The External Position of the Egyptian Economy Report”, a series produced by the Economic Research Sector at the Central Bank of Egypt (CBE).
The Report tracks, on a quarterly basis, the international transactions that the Egyptian economy conducts with the rest of the world. It relies, for this purpose, on national statistics that are regularly compiled in line with the SDDS prescriptions. Enthused by the CBE’s keenness to enhance its disclosure, transparency and communication policy, the Report is meant to serve several functions.
Generally, it spreads, to a broad array of readers, knowledge of Egypt’s external accounts including the balance of payments, external debt, international investment position and external liquidity.
Particularly, it monitors key external sector performance indicators of the economy in order to identify areas of policy needs. The information revealed in this series has also significant implications for decision-making, investment climate, doing business environment and sovereign credit ratings.
Breakdown by Maturity
By original maturity external debt reaffirmed its pattern of long-term debt predominance in December 2021. Long-term debt accounted for $132.7bn, or 91.2% of the total external debt, whereas short-term debt accounted for $12.8bn or 8.8%.
By residual maturity, short-term debt amounted to about $29.1bn in December 2021. Meanwhile, long-term debt reached about $116.4bn.
Breakdown by Type
Long-term external debt registered $132.7bn (91.2% of total external debt) in December 2021, up by about $8.5bn compared to end of June 2021; of which:
Buyers’ and suppliers’ credit reached about $16.1bn, up by $3.3bn.
Bonds issued abroad (non-resident holdings) reached $31.4bn, up by $2.7bn.
Bonds outstanding stock as of December 2021 include: Roughly $26.1bn of Eurobonds issued in US dollar, about $4.3bn of Eurobonds denominated in euro, about $737.2m of Green bonds issued in US dollar; and about $355.4m of sovereign notes.
Multilateral institutions’ debt reached about $52.4bn, up by $2.4bn, as compared to June 2021. This increase came as a combined result of the recent SDR allocation by the IMF to Egypt of about SDR 1952.5m (equivalent to $2.8bn) last August 2021, and the repayments of other obligations to other multilateral institutions.
Non-guaranteed debt of the private sector registered $783.6m, up by $391.7m.
Long-term deposits placed at the CBE by some Arab countries stabilized at $15bn compared to June 2021.
These deposits are distributed as follows: $5.7bn by the United Arab Emirates, $5.3bn by Saudi Arabia, $4.0bn by Kuwait.
Repurchase Agreements (Repo) stabilized as well at $4.0bn in December 2021. Rescheduled bilateral debt reached around $1.6bn, down by $358.6m.
Other bilateral debt amounted to some $11.4bn, down by $19.4m.
Short-term debt decreased by about $873.8m to about $12.8bn or 8.8% of total external debt. Its ratio to net international reserves dropped to 31.4% in December 2021 from 33.8% in June 2021.
Breakdown by Currency
Measuring currency composition of Egypt’s external debt is an important indicator that sheds light on the external debt exposure to currency markets’ volatility.
Currency composition of the debt indicates that the US dollar is the main borrowing currency ($91.2bn). Other major currencies recorded $54.3bn, distributed as follows: SDRs 1 was the runner-up ($24.8bn), followed by the euro ($17.2bn), the Kuwaiti dinar ($3.9bn), the Chinese yuan ($3.8bn), the Japanese yen ($2.5bn), and other currencies ($2.1bn).
Breakdown by Creditor
Debt distribution by the creditor indicates that $52.4bn was owed to multilateral institutions. The IMF loans alone represent 45.2% of these institutions’ loans or about $23.7bn classified as follows: $11.6bn representing Extended Fund Facility (EFF), $2.9bn representing Rapid Financing Instrument (RFI), $5.2bn representing Stand- by Arrangement (SBA), and $4.0bn representing SDR allocations. The other major multilateral creditors came next, namely the IBRD ($11.8bn or 22.5%), EIB ($5.1bn or 9.7%), AFREXIM bank ($2.9bn or 5.5%), and AfDB ($2.8bn or 5.3%).
Additionally, $25.3bn was owed to Arab countries mainly; UAE (7.9% of total external debt), Saudi Arabia (5.0%), and Kuwait (4.1%). Meanwhile, $9.4bn came from five members of Paris Club countries, namely; Germany ($2.8bn), Japan ($2.6bn), UK4 ($1.8bn), France ($1.8bn), and USA ($0.4bn). In addition, $7.6bn was owed to China.
Breakdown by Debtor Sector
The structure of Egypt’s external debt by the debtor sector in December 2021 reveals that: – The government remains the main obligor, with a share of around 58.7% of external debt. Its debt rose by about $3.0bn in December 2021 compared to June 2021, reaching $85.5bn.
Banks’ external debt increased by about $2.7bn to $17.1bn.
The Central Bank’s external debt increased by about $2.2bn to $27.8bn, as a result of the new SDR allocation by the IMF to Egypt in August 2021.
On the other hand, the other sectors’ debt decreased by $315.2m to $15.1bn.
External Debt Service
Debt service reached $13.7bn (principal repayments registered $11.7bn, and interest payments $2bn) through July/December 2021/2022, compared to $7.8bn during July/December 2020/2021. The increase mostly reflects the rise in principal repayment by about $5.9bn, while interest payment stabilized at almost $2m.
External Debt Indicators
As for external debt in terms of international comparison, Egypt’s debt remains within manageable limits. Based on IMF classification, comparing Egypt’s key debt indicators with those of other regional country groups shows that:
Egypt’s external debt to GDP ratio represented 33.2% in December 2021 (compared with an average of 51.8% for Latin America and the Caribbean region and 42.4% for the Middle East and Central Asia region).
Egypt’s short-term external debt to total external debt in December 2021 registered 8.8% (compared with an average of 12.5% for Latin America and the Caribbean region, and 21.3% for the Middle East and Central Asia region).
Egypt’s debt-service ratio 3 registered 37.2% in the year ended in December 2021 (compared with an average of 41.7% for Latin America and the Caribbean region, and 20.6% for the Middle East and Central Asia region). However, Egypt’s debt- service ratio when calculated as a ratio to current receipts improves considerably to reach 23.8% in the year ended in December 2021.
External Liquidity: Net International Reserves
During July/December 2021/2022, the net international reserves (NIR) increased by $0.4bn (against an increase of $1.9bn in the corresponding period a year earlier) to reach $40.9bn, thus covering 5.8 months of merchandise imports in December 2021.
The increase came as an outcome of: (i) the rise in SDRs by about $2.5bn, (ii) the pickup in gold by $0.1bn, and (iii) the decline in foreign currencies by $2.2bn. During the preparation of the Report, NIR reached $37.1bn in March 2022, covering 5.2 months of merchandise imports.
Net Foreign Assets of Banks (NFA)
Banks’ net foreign assets decreased by $11.7bn during July/December 2021/2022 (against an increase of $5.9bn in the corresponding period a year earlier).
Foreign currency deposits with banks decreased by 0.1% during the period concerned, reaching $41.6bn in December 2021. In contrast, local currency deposits increased by 10.8%. As such, the ratio of foreign currency deposits to total deposits made up 12.7% in December 2021.
International Investment Position
Egypt’s international investment position (IIP) recorded net external liabilities (assets minus liabilities) of about $230.2bn in December 2021, up by 5.9%, compared to $217.4bn in June 2021. This increase in negative net IIP is mainly attributed to the rise in Egypt’s liabilities as compared to the end of June 2021.
Assets and Liabilities by Component
Assets decreased by about $7.5bn (or 9.6%), to reach about $70.9bn in December 2021, compared to June 2021.
This decrease in assets was driven by the decline in other investments’ assets by about $8.3bn (or 28.4%) to reach about $20.9bn.
Meanwhile, the other components kept showing a positive increase as follows:
Portfolio investment abroad increased by 25.6% to about $1.4bn.
Reserve assets increased slightly by 0.9%, to reach about $39.8bn.
Direct investment abroad increased by 2.1% to about $8.8bn. Liabilities increased by about $5.3bn (or 1.8%) to about $301.1bn in December 2021, compared to June 2021.
This increase mostly reflects: The rise in other investments liabilities by about $4.8bn (or 4.4%) to about $114.0bn.
The increase in foreign direct investment in Egypt by about $3.3bn (or 2.4%) to reach about $137.5bn.
On the other hand, portfolio investment in Egypt decreased by about $2.8bn (or 5.3%) to about $49.6bn in December 2021.
Egypt’s negative net IIP to GDP improved to about 52.5% in December 2021, from about 54.0% in June 2021.
Assets to liabilities decreased to about 23.5% in December 2021, from about 26.5% in June 2021.