Ministry of Finance of Egypt
Cairo – Akram Ali
An official from Egyptian Ministry of Finance told Arabstoday that, during the first two months of President Mohamed Morsi’s rule, the government has already borrowed 18 billion EGP (about $3 billion), warning of increased debts.
The source also said the government is about to agree to loans in the
region of 2.25 billion EGP with some Islamic financial institutions in order to aid the growth of the oil sector.
These deals are to be struck with with Qatar, Kuwait and Saudi Arabia, and our source stressed that, in order to pay all these debts, their interests and instalments, the country’s growth must reach 8%, necessitating the government to attract more foreign investments in all sectors.
Economics expert, and Professor of Public Finance, Abdel Moneim Lotfy, told Arabstoday, “Egypt owes about 170 billion EGP in internal and external debt. This is from previous loans of which payment date and related interest fees are due. If the country’s resources were being used as required, it wouldn’t have borrowed so much and would have been capable of providing services like health, education, sewage, and human development.”
Lotfy emphasised the importance of applying escalating tax rates in order to save high allocations out of the revenues, and share in the national economy.
He then stated that it was vital for the country to start collecting its arrears, decreasing expenses, restructuring the public expenditure and reconsidering power subsidies of high consuming factories, thus minimising the export subsidies.
He also explained that it is necessary to allocate a certain amount of the private funds (more than 5%) which are collected by the Ministry of Finance, with the rest being sent to bank deposits, in addition to encouraging private sector and infrastructure investments to minimise the government’s expenditure and reduce the state public deficit.
Dr Mona al-Baradei, Professor of Economics at Cairo University, said “solving Egypt’s economic issue, especially paying its debts, relies on the need for large scale local investments, and not only depending on foreign investments. Without serious steps taken along these lines, the next balance will allocate escalating amounts of money to pay the instalments and the original amount of the debt.”
Baradei added that “the real risk of these debts lies in the inability to pay the instalments of the loan,” and she stressed the need to increase the Gross Domestic Product (GDP), to curb government spending, to look for new sources to finance the state’s public budget and minimise its deficit so that Egypt wouldn’t continue borrowing, either internally or externally.
She also explained that Egypt still needs to bring back foreign investors in order to decrease the pressure on the local banks, and reduce its financial deficit. In addition, she talked of the necessity of adopting more effective and short-term economic policies which would help in economic stability by stimulating investments.