Global Courant 2023-05-30 12:25:53
The Standard Chartered Bank said nearly a third of Egypt’s debt is in foreign currency, and any additional moves in the US dollar exchange rate against the Egyptian pound will increase the debt ratio.
In its recent report, the bank explained that the increase in the value of the U.S. dollar to about LE 38 (as traded on the black market) the debt-to-GDP ratio would soar to more than 100 percent by the end of June 2023, the private Masrawy website reported.
Egypt’s foreign debt rose 5.2 percent during the last quarter of last year to $162.9 billion at the end of December, compared to $154.9 billion in September, according to data from the Ministry of Planning and Economic Development.
According to the bank’s report, debt was 91.6 percent of GDP in June 2022 based on International Monetary Fund estimates.
And according to the state’s draft budget for the new fiscal year, budget agency debt is expected to rise to about 96 percent of GDP by the end of June 2023.
Egypt’s return to a flexible exchange rate after being suspended in 2020 and 2021 led to a significant fall in the value of the pound since March last year.
As a result, the exchange rate of the US dollar against the pound rose by about 96 percent, from LE 15.76 per dollar on March 20, 2022, to LE 30.94 in bank transactions, as of Sunday.
Standard Chartered said the combination of high inflation, currency weakness and global interest rate hikes had a serious impact on Egypt, as the ratio of interest expense to income is likely to exceed 50 percent in the current and next fiscal year.
The report added that despite fiscal discipline keeping the deficit under control, challenges to Egypt’s debt sustainability are mounting.
Exchange rate remains stable
The price of the dollar against the Egyptian pound is about LE30.88, according to the Central Bank, a rate that has been stable for some time.
The government has devalued the pound by about 50 percent over the past year.
The use of foreign currency in buying and selling between citizens exposes them to legal penalties.
The law does not protect persons who commit this act if they have defrauded the other party during the process, said a lawyer and member of the Bar Association Issa Abu Issa.
Issa told Al-Masry Al-Youm that the law is clear on this issue as it prohibits dollarization in all its forms due to its negative effects on the national economy.
