<p>In this week&rsquo;s issue, we discuss afforestation and the burden of debt service payments</p>
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<h2 dir="ltr"><span style="color: rgb(6, 71, 137);"><strong>Afforestation: A Necessity in Our Arid Land&nbsp;</strong></span></h2>
<p style="text-align: justify;">The Ministry of Environment <a href="https://www.dostor.org/4741968#goog_rewarded">organized</a> a national dialogue on tree cutting, which has recently increased across several Egyptian cities, provoking public ire, especially as it coincided with soaring high temperatures. However, the <a href="https://www.dostor.org/4741968#goog_rewarded">recommendations</a> were overly general, ignoring the most crucial aspect of&nbsp;<a href="https://link.springer.com/article/10.1007/s12210-023-01155-3#Sec10">desertification</a> and the practices that encourage it&mdash;namely, the government&rsquo;s disregard of the issue of afforestation. The government has not used sewage water to its full potential to increase its tree coverage through large-scale afforestation, which is vital for mitigating climate change.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1719769308imageEd 76_5-5 EN.png" alt="" width="405" height="203"></p>
<h3 dir="ltr"><strong>Tree cover loss</strong></h3>
<p dir="ltr" style="text-align: justify;">In 2010, Egypt <a href="https://www.globalforestwatch.org/dashboards/country/EGY/?category=forest-change&amp;location=WyJjb3VudHJ5IiwiRUdZIl0%3D&amp;scrollTo=forest-loss">had</a> about 143,000 hectares (1,430 km2) of tree cover, or 0.15% of the country's total area, but coverage has declined significantly, dipping to 35,000 hectares (350 km2) in 2023.</p>
<p dir="ltr" style="text-align: justify;">Forests contribute to Egypt&rsquo;s tree cover and can help recover the loss and provide a sustainable source of wood, but the government does not utilize its sewage water resources to solve the problem.</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1719769478imageEd 76_2 EN copy.png" alt="" width="405" height="405"></p>
<h3 dir="ltr"><strong>Ample sewage water is squandered</strong></h3>
<p dir="ltr" style="text-align: justify;">Due to its large population and vast desert land, Egypt has a unique <a href="https://webarchiv.it.ls.tum.de/aar.wzw.tum.de/information-summary/index.html#:~:text=Egypt%20offers%20a%20great%20opportunity,crops%20and%20for%20carbon%20trading.">opportunity</a> to undertake large-scale afforestation. The country <a href="https://www.eeaa.gov.eg/Topics/87/180/index">generates</a> ample sewage water, which can be valuable for cultivating green spaces and belts around cities.</p>
<p dir="ltr" style="text-align: justify;">The government has <a href="https://jfnile.journals.ekb.eg/article_275001.html">used</a> at most 6.8% of its treated water to cultivate 24 forests covering an area of 11,100 feddans (45.0 km2) in the desert land around sewage plants.</p>
<p style="text-align: justify;">In 2020, the government <a href="https://jfnile.journals.ekb.eg/article_275001.html">treated</a> 74% of the country&rsquo;s total sewage and dumped 63% in waterways and desert lands after basic treatment instead of using this water resource for afforestation.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1719769571imageEd 76_6 EN.png" alt="" width="405" height="405"></p>
<p dir="ltr" style="text-align: justify;">Despite the scarcity of water resources, Egypt is still heavily dependent on the <a href="https://www.sis.gov.eg/Story/545/%D9%85%D8%B5%D8%B1-%D9%88%D9%82%D8%B6%D9%8A%D8%A9-%D8%A7%D9%84%D9%85%D9%8A%D8%A7%D9%87?lang=ar">threatened</a> flows of the Nile River. Sewage water <a href="https://jfnile.journals.ekb.eg/article_275001.html">constituted</a> about 6.2% of the total water resources used by Egypt in 2020, while the Nile River comprised 67.5%.</p>
<h3 dir="ltr"><strong>Maximizing the use of alternative water resources</strong></h3>
<p dir="ltr" style="text-align: justify;">The government must make the most of treated sewage water resources and improve the efficiency of the treatment plants to <a href="https://jfnile.journals.ekb.eg/article_275001.html">expand</a> the forested area. This includes cultivating <a href="https://sdg.iisd.org/commentary/guest-articles/greening-the-wood-industry-sustainability-from-production-to-consumption/">sustainable timber</a> forests in the desert hinterlands in the governorates, which cover an area of 2.6 million feddans (10,600 km2). The government should also <a href="https://jfnile.journals.ekb.eg/article_275001.html">plant</a> biofuel-producing trees, which is a significant investment in alternative energy.</p>
<p style="text-align: justify;">While focusing on planting new forests and trees, it's crucial not to <a href="https://www.opml.co.uk/blog/why-trees-alone-won-t-save-planet-cop26">overlook</a> the cutting down of existing ones. The government must take a firm stance and <a href="https://eipr.org/en/press/2022/11/new-release-eipr-trees-and-gardens-egypts-cities-perspective-environmental-justice">enforce</a> legislation that criminalizes tree felling. Trees have become an endangered natural resource in Egypt, and it's time to protect them with a more robust legal framework.</p>
<hr>
<h2 dir="ltr"><span style="color: rgb(6, 71, 137);"><strong>Egypt in Service of Debt</strong></span></h2>
<p dir="ltr" style="text-align: justify;">The Central Bank of Egypt <a href="https://www.cbe.org.eg/ar/auctions/egp-t-bills">announced</a> the issuance of EGP100 billion in treasury bills, revenue from which the government <a href="http://e_zb3d9tmms5ennd71m_aem_2eevkv41upadjiiwtjdyka">uses</a> as a short-term fix to cover debt payments and the budget deficit. The issuance of treasury bills <a href="https://www.alhurra.com/egypt/2024/04/25/%D9%82%D8%B1%D9%88%D8%B6-%D9%88%D9%85%D8%AF%D9%81%D9%88%D8%B9%D8%A7%D8%AA-%D9%81%D9%88%D8%A7%D8%A6%D8%AF-%D8%A8%D8%A3%D8%B1%D9%82%D8%A7%D9%85-%D9%82%D9%8A%D8%A7%D8%B3%D9%8A%D8%A9-%D8%AA%D8%AA%D8%B9%D8%A7%D9%85%D9%84-%D9%85%D8%B5%D8%B1-%D9%85%D8%B9-%D9%85%D9%88%D8%A7%D8%B2%D9%86%D8%A9-%D8%A7%D9%84%D8%AA%D8%AD%D8%AF%D9%8A%D8%A7%D8%AA%D8%9F">allows</a> the government to borrow more, though it ignores that growing foreign debt hinders foreign direct investment (FDI) and puts additional pressure on the economy. With debt service expected to <a href="https://mof.gov.eg/ar/posts/stateGeneralBudget/65911fe582bd240008c29151/%D9%85%D9%88%D8%A7%D8%B2%D9%86%D8%A9%20%D8%B9%D8%A7%D9%85%D8%A9%202024%2025">eat up</a> EGP1.8 trillion of the 2024/25 public budget (up from EGP1.12 trillion in 2023/24), the government must work on a comprehensive plan that combines debt restructuring with policies that promote inclusive growth. First and foremost, it should stop resorting to short-term debt instruments as a quick solution to fiscal problems.&nbsp;</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1719769722imageEd 76_2-2 EN.png" alt="" width="405" height="203"></p>
<h3 dir="ltr"><strong>Short-term debt: An endless loop&nbsp;</strong></h3>
<p dir="ltr" style="text-align: justify;">While the government's strategy of rolling out treasury bills may <a href="https://www.sciencedirect.com/science/article/abs/pii/S0016718520300014">seem</a> like a solution to attract foreign investors and increase cash flows, it is a short-sighted policy. The influx of foreign investment in government debt instruments often <a href="https://www.bbc.com/arabic/business-58962799">attracts</a> volatile hot money. The high yield of treasury bills lures investors into these short-term debt instruments, only to suddenly exit and cause <a href="https://carnegieendowment.org/research/2023/05/how-rising-debt-has-increased-egypts-and-tunisias-geopolitical-peripheralization?lang=en">economic shocks</a>.</p>
<p dir="ltr" style="text-align: justify;">Investment in debt instruments differs from long-term <a href="https://aps.aucegypt.edu/en/articles/1402/podcast-el-hal-eh-with-dr-rabab-el-mahdi-featuring-former-deputy-prime-minister-of-egypt-ziad-bahaa-el-din">FDI</a>, which governments must attract to revive the economy. Ironically, Egypt&rsquo;s high rates of foreign debt <a href="https://alat.journals.ekb.eg/article_178832.html">discourages</a> FDI, which has not <a href="https://alat.journals.ekb.eg/article_178832.html">increased</a> significantly in recent years.</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1719769805imageEd 76_1 EN.png" alt="" width="405" height="404"></p>
<h3 dir="ltr"><strong>Egyptian economy choked by debt</strong></h3>
<p dir="ltr" style="text-align: justify;">Debt servicing as a percentage of export earnings <a href="https://www.cbe.org.eg/ar/economic-research/economic-reports/monthly-statistical-bulletin">increased</a> from 32.1% in 2022 to 42.6% in 2023. The high ratio of foreign debt service to export earnings <a href="https://www.sciencedirect.com/science/article/abs/pii/S0016718520300014">reflects</a> the dwindling availability of foreign currency and the government's inability to meet its obligations. As a result, debt payments pressure the economy at the expense of education, health, and <a href="https://aps.aucegypt.edu/en/articles/1398/the-bread-subsidy-is-good-why-remove-it-the-political-economy-of-budget-policies">social protection</a> funding, which have witnessed a significant decline.</p>
<p dir="ltr" style="text-align: justify;">Government spending on projects and utilities that do not generate sustainable development has <a href="https://aps.aucegypt.edu/en/articles/1402/podcast-el-hal-eh-with-dr-rabab-el-mahdi-featuring-former-deputy-prime-minister-of-egypt-ziad-bahaa-el-din">complicated</a> the debt crisis further. The government does not optimize the return on debt, which <a href="https://aps.aucegypt.edu/en/articles/1402/podcast-el-hal-eh-with-dr-rabab-el-mahdi-featuring-former-deputy-prime-minister-of-egypt-ziad-bahaa-el-din">requires</a> investment in industrial projects and services that improve economic indicators and citizen&rsquo;s quality of life, thus increasing their productivity.&nbsp;</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1719770477imageEd 76_3-3 EN.png" alt="" width="405" height="405"></p>
<p dir="ltr" style="text-align: justify;">Total domestic and foreign debt <a href="https://mof.gov.eg/ar/posts/stateGeneralBudget/65911fe582bd240008c29151/%D9%85%D9%88%D8%A7%D8%B2%D9%86%D8%A9%20%D8%B9%D8%A7%D9%85%D8%A9%202024%2025">represents</a> 96% of GDP. To make matters worse, debt payments account for <a href="https://mof.gov.eg/ar/posts/stateGeneralBudget/65911fe582bd240008c29151/%D9%85%D9%88%D8%A7%D8%B2%D9%86%D8%A9%20%D8%B9%D8%A7%D9%85%D8%A9%202024%2025">70%</a> of government revenues in the 2024/25 fiscal year, forcing the state to borrow to meet its financial obligations.&nbsp;</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1719770028imageEd 76_3-3 EN copy 2.png" alt="" width="405" height="405"></p>
<h3 dir="ltr"><strong>Preliminary steps to escape the debt trap</strong></h3>
<p dir="ltr" style="text-align: justify;">The government directs its attention, policies, and resources to debt service, <a href="https://manassa.news/stories/17971?fbclid=IwZXh0bgNhZW0CMTEAAR1sUshCFAKArQ37_OFIFMCX_frp303zvEuqkqBI5t-9UGgPhEBh2Xm_uEY_aem__N7esW3YZzIZK7zZhbj0rA">satisfying creditors</a> and <a href="https://carnegieendowment.org/research/2023/05/how-rising-debt-has-increased-egypts-and-tunisias-geopolitical-peripheralization?lang=en">complying</a> with their terms at the expense of spending on <a href="https://aps.aucegypt.edu/en/articles/1399/food-subsidies-to-keep-hunger-at-bay-and-social-protection-to-stop-child-labor">social protection</a>. Accordingly, Egypt has <a href="https://manassa.news/stories/17971?fbclid=IwZXh0bgNhZW0CMTEAAR1sUshCFAKArQ37_OFIFMCX_frp303zvEuqkqBI5t-9UGgPhEBh2Xm_uEY_aem__N7esW3YZzIZK7zZhbj0rA#google_vignette">become</a> a <a href="https://kalam.chathamhouse.org/articles/egypt-too-big-to-fail-or-too-difficult-to-save/">critically indebted</a> country with a <a href="https://carnegieendowment.org/research/2023/05/how-rising-debt-has-increased-egypts-and-tunisias-geopolitical-peripheralization?lang=en">fragile</a> economy that is highly vulnerable to external fluctuations.</p>
<p dir="ltr" style="text-align: justify;">Although the government <a href="https://www.reuters.com/markets/europe/egypt-can-no-longer-depend-hot-money-budget-finance-minister-2022-06-27/">acknowledges</a> that it can no longer rely on issuing treasury bills to finance the budget and must work to boost FDI, it continues to waste resources on debt interest payments, as it lacks a comprehensive plan to get out of debt.</p>
<p dir="ltr" style="text-align: justify;">The government should adhere to its pledges to reduce debt costs by cutting interest on short-term instruments that attract hot money. Every one-point discount on yields for treasury bills could <a href="https://aps.aucegypt.edu/en/articles/1398/the-bread-subsidy-is-good-why-remove-it-the-political-economy-of-budget-policies">save</a> EGP80 billion.</p>
<p style="text-align: justify;">The government <a href="https://eces.org.eg/wp-content/uploads/2023/07/%D9%87%D9%84-%D8%AD%D8%A7%D9%86-%D8%A7%D9%84%D9%88%D9%82%D8%AA-%D9%84%D9%84%D8%AA%D9%81%D9%83%D9%8A%D8%B1-%D9%81%D9%8A-%D8%A5%D8%B9%D8%A7%D8%AF%D8%A9-%D9%87%D9%8A%D9%83%D9%84%D8%A9-%D8%AF%D9%8A%D9%88%D9%86-%D9%85%D8%B5%D8%B1-%D8%A7%D9%84%D8%AE%D8%A7%D8%B1%D8%AC%D9%8A%D8%A9%D8%9F-1.pdf">must</a> also change its policies toward creditors, moving to negotiate debt <a href="https://www.imf.org/ar/Blogs/Articles/2024/01/24/how-to-ease-rising-external-debt-service-pressures-in-low-income-countries">relief</a> and <a href="https://www.icwa.in/show_content.php?lang=1&amp;level=3&amp;ls_id=10201&amp;lid=6506">restructuring</a> rather than seeing debt consume all state revenue. Restructuring <a href="https://blogs.worldbank.org/en/voices/silent-debt-crisis-engulfing-developing-economies-weak-credit-ratings">could entail</a> an expansion of <a href="https://aps.aucegypt.edu/en/articles/1148/egypts-debt-swaps-can-they-help">debt swaps</a>, which would divert liability to domestic investments in sustainable projects that <a href="https://aps.aucegypt.edu/en/articles/1402/podcast-el-hal-eh-with-dr-rabab-el-mahdi-featuring-former-deputy-prime-minister-of-egypt-ziad-bahaa-el-din">help</a> the country improve its economic indicators and attract FDI rather than hot money.</p>
<hr>
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<div style="text-align: justify;"><em>"Adasa" is a weekly policy digest by Alternative Policy Solutions. </em><em>"Adasa" provides an analysis of a select number of policy developments and their effect on inclusive development and socioeconomic change.</em></div>

عدسة

Adasa

السياسة النقدية

Monetary Policy

البيئة

Environment

زراعة

Agriculture

السياسات الاقتصادية

Economic Policies

تغير المناخ

Climate Change

زراعة الغابات الشجرية ضرورة والاقتراض عبء

Reviewing Afforestation and Indebtedness in Egypt

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