Egypt's external debt increases to $137.9bn in June 2021: Central Bank

Long-term debt ($124.2bn) accounts for 90.1% of total external debt, whereas short-term debt ($13.7bn) accounted for 9.9%

Egypt's external debt increased by about $14.4bn to $137.9bn in June 2021, compared to $123.5bn in June 2020. The increase was a result of the rise in net disbursements of loans and facilities by $12.2bn, alongside the depreciation of the exchange rate of US dollar vis-à-vis other currencies of external debt, leading to an increase of $2.2bn in book value.
Breakdown by Maturity
By original maturity, external debt reaffirmed its pattern of long-term debt predominance in June 2021.
Long-term debt amounted to $124.2bn accounting for 90.1% of the total external debt, whereas short-term debt stood at $13.7bn or 9.9%.
By residual maturity, short-term debt accounted for 26.6% of total external debt in June 2021, compared to 9.9% classified by original maturity. Meanwhile, long-term debt expressed in terms of residual maturity made up 73.4% of total external debt, in comparison to 90.1% based on original maturity.
Long-term external debt
Long-term external debt registered $124.2bn (90.1% of total external debt) in June 2021, up by about $11.6bn compared to the end of June 2020; of which: reached about $50.0bn, up by $7.0bn, as compared to end-June 2020. The increase reflected new loans; chiefly from the IMF ($3.2bn representing 2nd & 3rd tranches of the Standby Agreement SBA), from the European Investment Bank ($1.7bn), and from the Arab Fund for Economic and Social Development ($0.4bn).
Buyers' and suppliers' credit reached about $12.8bn, up by $1.4bn. Other bilateral debts amounted to some $11.4bn, up by $1.1bn. Repurchase agreements (Repo) recorded $4bn in June 2021, up by $86.4m. Bonds issued abroad (non-resident holdings) reached $28.7bn, up by $4.8bn.
Bonds outstanding stock as of June 2021 includes: Roughly $23.1bn of Eurobonds issued in US dollar, about $737.2m of green bonds issued in US dollar, about $4.5bn of Eurobonds denominated in euro; and about $355.4m of sovereign notes.
Conversely, long-term deposits placed at the CBE by some Arab countries decreased to $15.0bn, down by $2.2bn. These deposits are distributed as follows: $5.7bn by the United Arab Emirates; $5.3bn by Saudi Arabia; and $4.0bn by Kuwait.
Rescheduled bilateral debt reached around $1.9bn, down by $0.6bn. Non-guaranteed debt of the private sector registered $391.9m, down by $29.9m.
Short-term debt increased by about $2.8bn to about $13.7bn or 9.9% of total external debt. Its ratio to net international reserves edged up to 33.8% in June 2021 from 28.5% in June 2020.
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 ($85.4bn).
Other major currencies recorded $52.5bn, distributed as follows:
SDRs was the runner-up ($22.6bn), followed by the euro ($17.5bn), the Chinese yuan ($3.9bn), the Kuwaiti dinar ($9.7bn), the Japanese yen ($2.6bn), and other currencies ($2.2bn).
Breakdown by Creditor
Debt distribution by creditor indicates that $50.0bn were owed to multilateral institutions (IMF $21.6bn, IBRD $11.7bn, EIB $5.3bn, and ADF and AfDB $3bn). Additionally, $24.3bn was owed to Arab countries mainly; UAE (7.7% of total external debt), Saudi Arabia (5.4%), and Kuwait (4.3%).
Meanwhile, $10.1bn came from five members of Paris Club countries, namely; Germany ($3.0bn), Japan ($2.6bn), France ($1.9bn), UK ($2.0bn), and US ($0.6bn). In addition, $7.7bn was owed to China.
Breakdown by Debtor Sector
The structure of Egypt's external debt by debtor in June 2021 reveals that:
The government remains the main obligor, with a share of around 59.8% of external debt. Its debt rose by $13.1bn in June 2021 compared to end-June 2020, reaching $82.4bn.
Banks' external debt increased by about $2.5bn to $14.4bn.
Other sectors' debt increased by some $1.1bn to $15.5bn.
On the other hand, the Central Bank's external debt decreased by about $2.3bn to $25.6bn.
External Debt Service
Debt service reached $15.8bn (principal repayments registered $11.6bn, and interest payments $4.2bn) in FY 2020/2021, compared to $17.2bn in FY 2019/2020.
The decrease mostly reflects the decline in principal repayment by about $1.5bn.
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 debt stock to GDP represented 34.2% in June 2021 (55.5% for Latin America and the Caribbean and 53.7% for the Middle East and Central Asia).
Egypt's short-term external debt to total external debt in June 2021 registered 9.9% (12.6% for Latin America and the Caribbean, and 21.2% for the Middle East and Central Asia).
Egypt's debt-service ratio registered 35.4% in the year ended in June 2021 (59.8% for Latin America and the Caribbean, and 32.3% for the Middle East and Central Asia).
Meanwhile, debt service to current receipts represented 20.5% in the year ended in June 2021.
External Liquidity
Net International Reserves (NIR)
In FY 2020/2021, NIR increased by $2.4bn (against a decrease of $6.3bn a year earlier) to reach $40.6bn, covering 6.9 months of merchandise imports in June 2021.
The increase was an outcome of the rise in foreign currencies by about $2.5bn and the decline in SDRs by around $0.1bn.
During the preparation of the Report, NIR reached $40.8bn in October 2021, covering 6.9 months of merchandise imports.
Net Foreign Assets of Banks (NFA)
Banks' net foreign assets increased by $3.9bn in FY 2020/2021, compared to a decline of $4.3bn a year earlier.
Foreign currency deposits with banks increased by 0.5% in the reporting FY, reaching $41.6bn in June 2021.
Likewise, local currency deposits increased by 23.5%. As such, the ratio of foreign currency deposits to total deposits made up 13.9% in June 2021.
International Investment Position (IIP)
Egypt's IIP recorded net external liabilities (assets minus liabilities) of about $217.4bn in June 2021, up by 13.3%, compared to $191.8bn in June 2020.
The increase in negative net IIP is mainly attributed to the rise in Egypt's liabilities as compared to the end of June 2020.
Assets and Liabilities by Component
Assets increased by 12.2%, to reach about $78.4bn in June 2021, compared to $69.9bn in June 2020.
This increase was mainly due to the following developments:
Other investments assets increased by 25.3% to about $29.2bn. Reserve assets increased by 6.0%, to reach about $39.4bn. Direct investment abroad increased by 4.6% to about $8.7bn. Portfolio investment abroad decreased just slightly by 0.2% to about $1.1bn. Liabilities increased by 13.0% to about $295.8bn in June 2021, from about $261.7bn in June 2020.
This increase mostly reflects the following developments:
Portfolio investment in Egypt rose by 58.8% to about $52.4bn. Other investments liabilities went up by 9.6% to about $109.1bn. Foreign Direct Investment in Egypt increased by 4.0% to about $134.3bn.
Indicators
Egypt's negative net IIP to GDP increased to about 54.0% in June 2021, from about 52.7% in June 2020.
Assets to liabilities decreased to about 26.5% in June 2021, from about 26.7% in June 2020.
BOP Performance
Egypt's transactions with the external world recorded an overall BOP surplus of $1.9bn in FY 2020/2021 (against a deficit of $8.6bn a year earlier).
The current account deficit rose by 65.1% to $18.4bn (against $11.2bn). The capital and financial account resulted in a net inflow of $23.4bn (against $5.4bn).
Current Account
The increase in the current account deficit was mainly traceable to the following developments:
The services surplus dropped by 42.9% to post only $5.1bn (compared to $9.0bn).
The non-oil trade balance deficit increased to about $42.1bn (against about $36.0bn).
The investment income balance deficit increased by 9.2% to register $12.4bn (compared to $11.4bn).
On the other hand, Egyptian workers' remittances increased by 13.2% to post $31.4bn (compared to $27.8bn).
The oil trade balance deficit narrowed to $6.7m (compared to a deficit of $421.0m).
Services Balance
The services balance surplus dropped by 42.9% to post only $5.1bn (compared to $9.0bn), as a result of the decline in both services receipts, and services payments, as follows:
Services receipts decreased by 24.9% to some $16.0bn (against about $21.3bn), driven by a decline in most of its items:
Tourism revenues decreased by 50.7% to $4.9bn (from $9.9bn), driven by a decrease in the number of tourist nights to 47.8m nights (against 103.1m nights).
Transportation receipts decreased by 4.5% to about $7.5bn, from some $7.9bn.
This mostly reflected a decrease in the receipts of Egyptian aviation companies, ports services, charter flights, and receipts of repairing foreign aircrafts and ships, offsetting the increase in the Suez Canal transit fees which rose by 1.8%.
Government services receipts fell by 32.4% to $513.1m (from $758.5m), due to a decrease in other government services receipts, and expenses of foreign embassies in Egypt.
On the other hand, other services receipts increased by 10.9% to about $3.1bn (from some $2.8bn), due to an increase in the receipts of communication services, computer services, magazine and newspaper subscriptions, and legal and consulting fees.
Services payments dropped by 11.7%, to some $10.9bn (from $12.3bn), triggered by a fall in most of its items:
Other services payments fell by 15.9% to about $5.1billion (from about $6.1bn), due to a decrease in the amounts transferred abroad by foreign petroleum companies, and in insurance fees.
Travel payments contracted by 15.7% to about $2.7bn (from about $3.2bn), due to the decrease in travel expenses for pilgrimage, and in the amounts transferred by tourism companies and hotels abroad.
Transportation payments decreased by 11.6%, to about $1.8bn (from about $2.1bn), due to a decline in the amounts transferred abroad for rental of aircrafts, and for foreign aviation companies.
On the other hand, government services payments increased by 27.8% to roughly $1.2bn (from $975.8m), reflecting rises in the expenses of Egyptian embassies abroad, and in the salaries and expenses of government employees abroad.