FILE – Ahmed Kojak
CAIRO – 4 February 2019: Deputy Minister of Finance for Financial Policies Ahmed Kojak said that the public debt reduction strategy includes a forward-looking approach aiming to achieve a growth rate of more than 6 percent over the next 4 years and an inflation rate of 12 percent in 2020 and of 9.8 percent by the end of the strategy period in 2022.
The Central Agency for Public Mobilization and Statistics (CAPMAS) announced earlier that the annual inflation rate declined to 11.1 percent in December 2018, compared to 22.3 percent in December 2017.
Meanwhile, Planning Minister Hala el Saeed said that Egypt’s economic growth rate hiked during the second quarter of fiscal year of 2018/2019 to record the highest rate in a decade, amounting to 5.5 percent, compared to 5.3 percent during the same quarter of previous fiscal year 2017/2018.
"The strategy aims to reach 30 percent of the external debt of GDP in 2022," he said, adding that a committee headed by the prime minister will be formed to distribute the figure to finance, the central bank and business sector companies.
The deputy minister of finance said that the external debt payments this year recorded $10.5 billion, to reach $10.3 billion next year, confirming that these are the figures announced by the Central Bank of Egypt in a certain period and can increase in the case of external borrowing.
He pointed out that there is great coordination between the Ministry Financial and the central bank, noting at the same time that sometimes there are different objectives depending on the economic conditions.
“The external debt has witnessed a significant decline during the last period, reaching about $91.7 billion in June 2018, or about 37 percent of GDP, compared to 41 percent of GDP during last fiscal year 2017/2018,” he elaborated.
Kojak clarified that the volume of external debt is measured in proportion to GDP and not the volume of debt itself, pointing out that the global indicators set the safe borders of external debt at 30 to 50 percent of GDP, and thus the size of the current external debt lies within the safe borders.
"The government has been forced to expand external borrowing over the past period to cross the transitional phase of economic reform, counteract the effects of exchange rate liberalization, increase interest rates and provide foreign currency," Kojak said.
"However, the country was keen to have these loans on concessional terms with little interest and long-terms, especially that the short-term debt has a large risk on the public budget, and by the end of this stage, the central bank began the process of reducing its debt since the beginning of the year, which reached about $27 billion in June 2018,” the deputy finance minister said.
Finance Minister Mohamed Mait stated Sunday that the ministry has succeeded in reducing the debt ratio of budget instruments (domestic and foreign) to domestic product to reach 97 percent of GDP in June 2018 instead of 108 percent of GDP in June 2017 and 103 percent in June 2016.
The minister attributed the success of the debt reduction plan mainly to the first surplus in 15 years of LE 4 billion in 2017/2018 and an economic growth rate of 5.2 percent.
“Although moving towards achieving high growth rates and reducing public debt rates, the Ministry of Finance aims to reduce the ratio of debt to GDP to 93 percent in June 2019 and then to 88 percent in June 2020, to reach 80 percent in June 2022 in light of targeting an annual first surplus of 2 percent of GDP and achieving annual growth rates of more than 6 percent in the medium term,” he pointed out.
The minister off revealed that there is another trend to reduce external debt, pointing out that the ratio of the external debt of the Arab Republic of Egypt to the GDP fell to 36.8 percent in June 2018, compared to 41.1 percent in June 2017.
“The target is to reach about 34 percent of the GDP in June 2019, which means that Egypt's external indebtedness has started to fall within the safe range, according to IMF estimates of 30-50 percent of GDP,” Ma’it elaborated.