While experts warn that the increase in public debt is a serious problem requiring very careful handling, government officials assume it remains within safe limits. Mona El-Fiqi reports The continuing growth of the public debt in the government's budget raises considerable controversy among experts. Some believe that the public debt is reaching dangerous levels and may cause a real crisis for the Egyptian economy while others agree with the government's official announcements that it is a problem but not a serious one. During the annual conference of the Economics Department at the Faculty of Economics and Political Sciences at Cairo University, Gouda Abdel-Khaleq, head of the economic committee of the left-wing Tagammu Party said that the government should not ignore the question of the increasing public debt. "The real crisis is that although a growing public debt is one of the serious problems facing the Egyptian economy, government officials simplify it by assuming that it remains in the safety limits," Abdel-Khaleq said. According to the Central Bank of Egypt's annual report, the public local debt rose to LE292.7 billion in fiscal year 2004/2005 as compared to LE252 billion in 2003/2004. Moreover, the debts of the public economic institutions increased by LE0.9 billion to reach LE40.1 billion while the National Investment Bank debts increased by LE22.8 billion to reach LE102 billion. As for the external debt, CBE figures show that it has witnessed a slight increase of $0.2 billion to reach $28.9 billion by the end of June 2004. The reason behind this increase is that a high percentage of this debt is denominated in currencies whose exchange rates against the dollar have skyrocketed. Commenting on the issue of the high rate of public debt, Youssef Boutros-Ghali, minister of finance, in a recent session at the People's Assembly, announced that the government's debts represent 74 per cent of Egypt's GDP and it is expected to be down to 73 per cent next year. However, Boutros-Ghali asserted that the public debt remains in the safety limits and that the newly applied tax law and the increase of oil and gas production as well as the expected increase in export revenues will help raise the surplus which will be allocated towards paying government debt. Some experts' assessments of the public debt issue fall in line with those of the government's announcements. Ahmed Galal, executive director of the Egyptian Centre for Economic Studies said that the public debt is not considered a crisis since the bulk of these debts are long-term loans. The public debt is raising a lot of controversy, not only on whether it is too high, but even its definition has come into question. Although the public debt is known among experts as the debt which is owed by the government, which includes the local and external debt as well as public economic institution's debts, Abdel-Fatah El-Gebali, advisor to the minister of finance argued that the debts of the public institutions and the National Investment Bank should not be included in the public debt as long as these associations are able to pay their own debts. Yet Hamdi Abdel-Azeem, president of Al-Sadat Academy for Administrative Sciences, says that the public debt should include the economic institutions debts since the government is committed to pay them if the public economic institutions are unable to pay. For example, since the government is committed to pay any debts owed by public economic institutions, LE1.7 billion is allocated in the current budget to pay the Railway Authority's debts as a result of its inability to pay them. However, El-Gebali asserted that except for the Railway Authority other economic institutions are able to pay their debts. The government officials announced that the increase in public debt is a consequence of a mounting budget deficit which stood at LE42.2 billion in the 2003/2004 budget. El-Gebali explained that the reason behind an accumulated budget deficit is the enlargement of several budget items such as wages which expanded from LE2 billion in fiscal year 1981/1982 to LE45.8 billion in 2003/2004. A parliament member who preferred to be anonymous suggested the formation of a national committee to discuss the best ways to handle the acceleration of public debts. The government has already started to restructure the public economic entities, a step which was praised by experts. Abdel-Azeem said that a joint stock company was established to invest the potentials of Egypt's Railway Authority in an attempt to change it from a loss-making entity to a profitable one in order to be able to pay its own debts. Moreover, Abdel-Azeem explained that the internal debts should be rescheduled from short-term debts to long-term debts. "It is preferable to issue 10-year treasury bonds to give the government a chance to pay them." One more solution, according to Abdel-Azeem, is that the Central Bank of Egypt should use any available surplus to pay these debts before they are due to save the interest from these instalments. Abdel-Azeem added that part of the economic institutions' debts should be transferred into shares in profitable public companies being listed for privatisation, particularly those in communication, cement, petrochemicals and the state banks and insurance companies. The Ministry of Finance began a plan to increase the country's resources and expand the number of tax payers by applying the new tax law. Finally, El-Gebali explained that the government started to restructure the public debt by changing the short-term treasury bonds into long-term ones to reduce their costs. It has also set the Primary Dealers System, according to which 13 private and public banks are now entitled to subscribe for the government's treasury bills and bonds offers, thus guaranteeing full subscription in these offers.
