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What Does the Egyptian Government Debt Service Rising to EGP 406.2 bln Mean?

What Does the Egyptian Government Debt Service Rising to EGP 406.2 bln Mean?

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Photo credit: Mohamed Abd El Ghany / Reuters
On Wednesday, the Central Agency for Public Mobilisation and Statistics (CAPMAS) announced that Egypt’s government debt service has risen to EGP 406.2 bln. This is an increase of EGP 45.5 bln from 2016/17, which saw a government debt service of EGP 370.7 bln. The government debt service is the payment required of the government to pay off its debt for a particular period. As a consequence, why has the government’s debt service increased so dramatically? The most likely answer is that the government issued new bonds locally, to fund projects of its own, at higher interest rates. Additionally, when the government made the eurobond sale back in February, it issued new bonds to be paid in foreign currency. Thus, the majority of this increase in the government debt service can be attributed to the new issuance of bonds made at higher interest rates both locally and abroad. Sure enough, the interest on domestic and international loans increased from EGP 159.2 billion in 2016/17 to EGP 247 billion in 2017/18. Why is the government issuing so many bonds to raise capital? The simple answer is that the government needs to raise cash in order to fund the ventures it has currently set into motion to encourage economic growth. The cash it is borrowing is being injected into the economy for the most part. It is normal for the government to run a large deficit in an economic downturn as it attempts to encourage economic growth by spending more. Though this increase in spending contrasts strongly with austerity measures the government has already put in place such as increasing taxes and slashing subsidies.

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تنوية هام: الموقع غير مسئول عن صحة ومصداقية الخبر يتم نشره نقلاً عن مصادر صحفية أخرى، ومن ثم لا يتحمل أي مسئولية قانونية أو أدبية وإنما يتحملها المصدر الرئيسى للخبر. والموقع يقوم فقط بنقل ما يتم تداولة فى الأوساط الإعلامية المصرية والعالمية لتقديم خدمة إخبارية متكاملة.

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