Egypt in crisis as US$3,5bn debt piles up

EGYPT'S foreign debt increased by US$3,5 billion in the three months leading up to the end of December, according to the central bank data released yesterday.

Total foreign debt climbed to US$168 billion from US$164,5 billion at the end of September and US$162,9 billion at the end of December 2022.

Egypt has quadrupled its external debt since 2015, using it to finance various initiatives such as constructing new capital, developing infrastructure, procuring weaponry, and sustaining an overvalued currency, Reuters reported.

The central bank reported that the foreign debt, of which 82,5 percent was long-term, amounted to 43 percent of the gross domestic product.

Following the Ukraine crisis, which resulted in a chronic shortage of foreign currency and prompted an exodus of foreign investors, the government of Egypt sought assistance from the International Monetary Fund (IMF).

The country deliberately allowed its currency to weaken by over 35 percent in a much-anticipated devaluation, potentially opening the door for additional loans from the IMF.

In March, the International Monetary Fund (IMF) approved a US$5 billion augmentation to its loan program for Egypt. The approval increased the Extended Fund Facility arrangement from the initially approved US$3 billion in December 2022 to US$8 billion.

The IMF has consistently advocated for Egypt to implement tighter monetary policies to address nearly 30 percent inflation and adopt a more flexible official exchange rate.

As part of the agreement, Egypt committed to reducing spending on large government projects. — Business Insider Africa