Egyptian domestic debt issuances witnessed a jump during the first quarter of the current fiscal year 2023/2024 to 1.22 trillion pounds ($39 billion), according to recent data from the Central Bank of Egypt.
On an annual basis, domestic debt issuances increased by 25% in the first quarter of the fiscal year that began on July 1, 2023 and ends on June 30, 2024.
The budget for the fiscal year 2023/2024 aims to reduce public debt rates from 96% of the gross national product to 93% by the end of 2024.
The yields on 3-month government treasury bills this September amounted to about 25%, and 25.6% for 364-day bills, while the yield on 3-year treasury bonds reached about 24.1%.
Egypt’s financing needs during the current fiscal year amount to about 2.14 trillion pounds, of which 1.955 trillion pounds is through local financing via treasury bonds and bills.
The Ministry of Finance expects the budget deficit to reach 824.4 billion pounds ($26.7 billion) in the fiscal year 2023/2024, which began on July 1, up from an estimated deficit of 723 billion pounds in 2022/2023 and 486.5 billion in 2021/2022.
Egypt must pay another $15.1 billion in short- and long-term debt payments during the second half of this year, followed by another $46.3 billion in medium and long-term debt payments during the years 2024 and 2025, according to the Egyptian Central Bank data.
In its report, earlier in September, Fitch Agency suggested that foreign investors would continue to withdraw money from the local debt market, due to negative real interest rates, declining demand for emerging market assets, and tightening global financial conditions.
Interest rates in banks currently stand at 19.25% for deposits and 20.25% for lending, while annual consumer price inflation reached 39.7% last August, compared to 38.2% in July and 15.3% in August 2022.
Investors have withdrawn more than $20 billion from the local debt market since last year.
Foreigners’ holdings of treasury bills decreased from $21.3 billion at the end of January 2022 to about $12.2 billion at the end of last May.
On Saturday, Egyptian President Abdel Fattah al Sisi issued a decision approving a Japanese loan of about 44 billion yen ($295 million) provided by the Japan International Cooperation Agency (JICA).
The country’s external debt rose to $165.4 billion at the end of the third quarter of the 2022-2023 fiscal year, late last March, compared to $162.9 billion at the end of the second quarter of the same year in December 2022, and $145.5 billion by the end of 2021.
A report by the European Bank for Reconstruction and Development revealed that the growth rate in Egypt declined to 4.1%, stressing that the path to reducing inflation is arduous and long, in reference to worsening economic risks and doubts about Cairo’s ability to repay its debts.
On the other hand, the Egyptian government said that it had agreed with the International Monetary Fund to merge two reviews of reforms, including floating the pound.
In light of the absence of data, Cairo’s reservations about many matters related to the economic situation, and the absence of rational spending of funds, Cairo may not be able to face the economic challenges that are increasing day after day.