Data released by Egyptian officials, foremost among them those at the Central Bank, have shown a noticeable decline in all foreign currency earnings, including income from tourism, direct and indirect foreign investment, transport services, Suez Canal tolls, oil exports, government revenues and revenues from investment and international aid. Consequently, Egypt has resorted to further external and internal borrowing, leading to the exacerbation of the burden emanating from the costs of public debt, such as interest and repayments.
Tourism revenues in 2020 declined to $4.4 billion, down from $13 billion the previous year. This amounts to a decline of about 66 per cent, the lowest since 2016. The number of tourists fell from 13 million in 2019 to 3.7 million, a decline of about 72 per cent. The minister of tourism expects tourism to return to normal by autumn 2022, but the former chair of the General Union of Tourism Chambers, Ilhami El-Zayyat, believes that 2024 is more likely.
There has been a 35 per cent decline in net foreign investment down from $9 billion to $5.85 billion. This is the lowest amount since 2014 and the decline is expected to continue, not least because of the ongoing security measures against businessmen, some of whom have been arrested without reason and prevented from seeing their families. There is also the rise in the interest rates on borrowing to consider, and the government's competition with the private sector over banking funds and project implementation.
The value of oil exports declined by 34 per cent compared with 2019, the lowest level since 2016. Portfolio investments in Egypt went down by 75 per cent, the lowest since 2018. Even worse, transport revenues — air, sea and road — declined by 45 per cent, a new low since 2006. Suez Canal revenues also fell, recording the lowest figure since 2017.
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Income from investments abroad also declined, by 48 per cent, again the lowest since 2016. Fees collected on services provided by Egyptian Consulates abroad to Egyptian citizens also fell to their lowest level since 2018. Moreover, international aid from foreign governments and international agencies was at a negative level unprecedented in recent years.
Thus, revenues from nine of the thirteen main sources of foreign currency have fallen. The other four saw increases, including loans, which increased by 91 per cent to $23.6 billion compared with $12.4 billion in 2019; remittances by Egyptian expatriates, which grew by about 11 per cent; earnings from services other than tourism and transport, which grew by five per cent; and exports of non-petroleum commodities, which grew by less than one per cent.
There has also been a parallel rise in many aspects of ordinary payments overseas, foremost among them imports of non-petroleum commodities, which rose to the unprecedented figure of $55.3 billion, despite the multitude of measures taken by the authorities to reduce imports. Portfolio investment abroad also hit a record figure of $1.6 billion. Additionally, government payments reached the highest level since 2017 and capital account payments increased to the highest figure since 2009.
The result has been the prevalence of deficits in all balances, most notably the in the commodities commercial balance, the balance of commodities and services, investment income and the deficit in current transactions, which increased by 39 per cent, leading to an overall all payment deficit of $7.5 billion, the difference between gross revenues and gross payments.
Yet this is not a real figure because as part of the revenues there are loans amounting to $23.6 billion and foreign bonds amounting to $3.8 billion. In other words, by adding such loans and bonds the actual deficit is a staggering $34.9 billion.
Data relating to investments made locally during the fiscal year 2019/2020 points to an overall decline of 17 per cent in value compared with the fiscal year 2018/2019. There has been a 31 per cent decline in private sector investments; a 42 per cent decline in the investments of the Economic Authority; and a 13 per cent decline in the investment of public companies.
While data from the ministry of planning shows an increase of 34 per cent in public sector investments, figures from the finance ministry show that in comparison with the value of forecast investments by the public sector in the fiscal year 2019/2020, only 78 per cent assumed to have taken place since the beginning of the fiscal year actually happened.
Likewise, the value of investments implemented in some sectors during the fiscal year 2019/2020, compared with the previous fiscal year, showed a decline of 56 per cent in the value of investments carried out in the natural gas sector; a 52 per cent decline in the wholesale and retail markets; a 46 per cent decline in the electricity sector; a 45 per cent decline in the crude petroleum sector; a 31 per cent decline in petroleum refining activities; a 19 per cent decline in recycling industries apart from gas and oil; a 17 per cent decline in agriculture, irrigation and land reclamation; and an eight per cent decline in the building and construction sector.
Since the latter affects several industries that manufacture building materials and their workforces, the government data showed that the sale of reinforced steel in 2020 reached its lowest level in seven years. This was despite all the government projects, such as the new administrative capital, for example. They also showed a five per cent decline in cement sales last year compared with 2019.
The purchase directors' index for Egypt, which is prepared by UAE Dubai Bank, points to the continuation of the recession in Egyptian markets during March for the fourth consecutive month.
The IMF forecasts that the Egyptian economy's growth rate during the current year will be 2.5 per cent compared with 3.6 per cent in 2020. It also forecasts an increase in the negative level of the percentage of Egyptian current account transactions this year to four per cent of GDP, compared with minus 3.1 per cent last year.
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The IMF also forecasts that the percentage of public debt will rise to 93 per cent of the GDP compared with 90 per cent in 2020. It also forecasts a rise in the level of unemployment in the current year to 9.8 per cent; it was 8.3 per cent last year.
With Egypt's foreign debt increasing by the end of 2020 to a historically unprecedented level of $129 billion, this year has so far indicated that more borrowing will take place from the World Bank, the African Development Bank, the European Bank for Reconstruction and Development, the Japanese Agency for International Cooperation and other parties. Foreign debt is thus expected to hit the figure of $139 billion by the middle of this year, according to a study commissioned by Pharos Holding for Financial Investments.
The Central Bank pointed out that the value of foreign debt and loan interest payments, both medium and long term, during the decade 2021 to 2030 will be around $101 billion. This confirms that the Egyptian economy has indeed fallen into the trap of foreign debt, which requires more borrowing in order to service old loans, especially with the need for more foreign currency in order to fulfil local requirements of imported oil.
We should take into consideration the fact that the average price of Brent Crude was $61 per barrel during the first quarter of this year. To this should be added the increases in the prices of vegetable oil, of which Egypt imports 85 per cent of its domestic requirement, as well as the increases in the prices of meat, dairy products, wheat and minerals. Meanwhile, exports this year to date have declined.
Translated from Arabi21, 18 April 2021
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.