Egyptian Finance Minister Mohamed Maait has told Bloomberg said that his country will not get a new loan from the International Monetary Fund (IMF) until after one or two months. The current alternative for Egypt is to resort to countries such as China and Japan to get a “soft loan”.
Last month, Reuters published an analysis of the troubled economic situation in Sri Lanka, after it had been declared to be bankrupt; the fleeing of the now former president; and the people’s storming of the presidential palace. The analysis confirmed Sri Lanka’s need for a new loan from the IMF as a temporary solution, but it would not get it before heading to countries such as China and Japan to get soft loans.
In the past few months, the Sri Lankan scenario has become a nightmare for the Egyptian regime and its troubled media, since the images of popular anger, the storming of the presidential palace and pursuit of officials in the streets have rung alarm bells in Egypt. The regime of Abdel Fattah Al-Sisi has drowned the country with foreign debt, putting Egypt among the worst countries in the world for issuing sovereign debt, according to a report by S&P Global Ratings.
Indeed, estimates by Egyptian economic experts place the total Egyptian public debt at 130 per cent of the country’s GDP. This is very similar to the equivalent figures in Sri Lanka — where it is 140 per cent — which prompted the IMF to demand Sri Lanka’s new government to reduce it to less than 100 per cent before it will grant new loans.
The real problem facing the Egyptian regime now is having to go again to a country like China to get soft loans. China adopts a hidden loan policy in such situations. It does not declare the details of such loans except within government data. The system works by taking over sovereign assets in debtor countries in return for setting a concessional rescheduling of the debts. This is what Beijing did in Sri Lanka, where it took control of its main port on the Indian Ocean after the government failed to repay the $307 million construction loan.
The same thing was repeated in Zambia, where China took over the main hydroelectric power station and 60 per cent of Zambia’s state radio station. Likewise, China is now planning to take over the port of Mombasa after Kenya failed to repay its debt to Beijing.
Domestically, the Egyptian regime is trying to promote the narrative that the world is suffering from severe economic crises due to Russia’s war in Ukraine and the Covid-19 pandemic. In theory, this may sound reasonable, but the reality is that the regime has not provided any real relief and support to citizens as many other countries have done over the past two years. On the contrary, the Egyptian Ministry of Finance announced that it has collected about a trillion Egyptian pounds from taxpayers, which is equivalent to 70 per cent of the state budget. Before that, the ministry also announced that the total money transfers from Egyptians living abroad amounted to $31 billion, an amount higher than the revenues of both the Suez Canal and the tourism sector this year.
Somewhat disastrously, Maait has said that the state will use these funds to pay off its debts due by the end of this year. This reflects a general policy adopted by the regime, where a similar thing was said by the Minister of Transport, Kamel Al-Wazir, on television last month; the government will raise the price of train and metro tickets to pay its outstanding debts.
During my own television programme, I asked the audience about their debts, and within a few minutes the production team received details of nearly one million Egyptian pounds owed by just twenty citizens in different professions. They are trapped in a vicious cycle of endless debt.
The Central Agency for Public Mobilisation and Statistics published official figures last year showing that over 50 per cent of Egyptian families resort to debt to cover their daily needs. Another report published by the Arab Barometer Network affirmed that Egypt was the top among Arab countries, with 80 per cent, where citizens have no money to buy food when their monthly income runs out. The report also showed that Egypt occupies first place in the Arab world in terms of citizens’ concerns about not being able to buy enough food and drink.
With such devastating statistics, the Egyptian economy is a time bomb waiting to explode under Al-Sisi and his regime. When it happens, it won’t be due to a political or ideological movement; it will be an angry popular explosion by citizens seeking a way of out poverty and hunger.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.