Egypt’s external debts will be raised to $53.4 billion with the expected incoming International Monetary Fund (IMF) loan, finance minister Amr El-Garhy said in an interview on Yahdoth Fi Masr programme that aired on MBC Masr late on Sunday.
The projected size of the debt correlates with data released by the central bank which shows that Egypt's external debt had already reached $53.4 billion in the third quarter of fiscal year 2015-2016 (January-March).
Egypt's external debt stood at $48 billion at the end of FY14-15 (June 2015), the central bank said last October.
The minister said the loans would be repaid over a number of years with low interest rates, and that the expected growth of the economy, especially in the industrial sector, will enable Egypt to repay its debts.
The government is seeking a $12 billion loan from the IMF in talks that started on Saturday.
IMF spokesperson William Murray told a regular biweekly news briefing last week that the size of the financing programme will depend on the assessment of financial needs and the strength of the reform programme during talks in Cairo, Reuters reported.
It is an “Egyptian reform programme,” El-Garhy told Yahdoth fi Masr on Sunday, reiterating government statements that negotiations with the IMF are not about “conditions” being imposed on Egypt, but presenting the country’s reform programme, and that the government has been in talks with the monetary organisation for three months.
The reform programme includes value-added-tax (VAT) legislation, cutting government spending, IPO of state-owned companies – or launching state-owned companies on the stock market – and issuing foreign-exchange-denominated bonds.
El-Garhy also said that the idea of the loan is to “say that we have a reform programme in order to reduce the [$10 billion-$11 billion yearly] deficit and to keep the debt-to-GDP ratio stable at [98-99 percent].”
The more the deficit increases, the more inflation increases, the minister explained.
El-Garhy said other loans aim to reduce the budget deficit such as the $3 billion World Bank loan that the government signed last year and a $1.5 African Development Bank (ADB) loan, in addition to international bonds.
Egypt has already received the first $500 million tranche from the ADB and is expected to receive the second later this year.
The country is aiming to tap into international bond markets by October, Prime Minister Sherif Ismail stressed last week.
“The important thing is to make sure that the economy is able to create job opportunities, especially through the industrial sector," El-Garhy said.
The minister said it is important to develop industries that can substitute for imports, and to encourage exporting in order to close the gap in the trade balance.
“The idea is to open up the economy quickly, to achieve growth and bring direct and indirect investments... in order to create job opportunities” El-Garhy explained.
In case an agreement is reached with the IMF, Egypt will receive the first tranche of the loan within two months – a minimum of $2 billion, deputy Finance Minister for Monetary Policy Ahmed Kojak said at a news conference on Thursday.
Each tranche of the loan would have to be repaid within five years, including a three-and-a-quarter-year grace period, Kojak said.
Egypt expects the interest rate from the IMF loan programme to be 1 percent or 1.5 percent, according to Reuters.
In the interview, El-Garhy also denied that the issue of laying off two million employees was on the table at the negotiations or that it was proposed by the IMF delegation, in response to earlier reports that said the government refused such proposal.
The House of Representatives will need to approve any deal with the IMF it before it is referred to the president for ratification.