<h3>Introduction</h3>
Egypt's external debt increased significantly, reaching $165 billion in June 2023, compared to approximately $34 billion in 2012 (CBE, 2024). The government has recently secured an influx of hard currency from the European Union (EU) through concessional loans, investments, and grants. The EU will dispense USD8.06 billion over four years (EU, 2024). The EU deal follows the UAE&rsquo;s injection of an estimated USD35 billion in direct investments at Ras El Hekma on the Mediterranean Sea.
This recent injection of funds has helped the Egyptian government relieve its financial crisis - at least temporarily. However, the external finances did not alleviate the citizens' hardships, as they struggled to secure their livelihood. Government loans have added to the impact of the debt burden on citizens, which has caused inflation, an irreversible rise in the prices of goods and services, and an erosion in their savings.
Egypt&rsquo;s external loans have donor conditions attached, especially from the International Monetary Fund (IMF). This conditionality drove the government to expand its privatization policy and crackdown on subsidies, as evidenced by the latest 400% hike in subsidized bread prices. Despite Egypt&rsquo;s compliance with many of the conditions, the IMF has delayed the dispersal of a USD820 million loan tranche - apparently due to the government's delay in raising fuel and electricity prices (IMF, 2024; al-Hurra, 2024).&nbsp;
The government's dependence on external borrowing to pay off foreign debts negatively hampers its ability to import the country's basic needs. It increases its prices locally due to a shortage in supply. Inflation rates, which reached 35.2% at the end of 2023, came from the dwindling foreign currency liquidity resulting from debt servicing. The government excluded citizens from its policy decisions related to external borrowing. There was no call for any community dialogue about it. However, in the years that followed 2014, the mounting debt and the financial burden of its service affected all aspects of people&rsquo;s lives and stripped them of their simple pleasures.&nbsp;&nbsp;
This article illuminates the profound changes in citizens' lives caused by foreign debt and its impact on their spending patterns. It also compares the escalating external debt to the deteriorating quality of life and considers the potential future consequences of the ongoing debt-repayment crisis.&nbsp;
<h3 dir="ltr">A decade of mounting debts: 2014-2024</h3>
Egypt&rsquo;s external debt has surged over the last ten years, rising from $46 billion in 2014 to $165 billion in 2023. In 2011, the year of the revolution, the external debt was $34 billion. During three years of political unrest, the debt increased by only 9 billion, reaching $43 billion in 2013. This contradicts the prevailing statements that this period was the reason for burdening Egypt with foreign debt.
Figure 1:&nbsp;Egypt paid $103 billion in debt service in 10 years, including $28 billion in interest and $74 billion in installments.
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1721811774imageFigure 1 Eng.png" alt="" width="629" height="474">
Source: Central Bank of Egypt. Monthly bulletin of statistics. Various issues.
Many countries, including rich states, incur different forms of public debt to finance their expenditures. However, indebtedness is a heavy burden in Egypt because of its magnitude, equivalent to 40.3% of GDP (CBE, 2024); the government must repay $32.8 billion this year alone. Figure (1) depicts the Egyptian annual payoff of debt interest only, illustrating the magnitude of citizens' burden. However, the biggest crisis concerning Egypt&rsquo;s public debt is that it grew too fast and has not contributed to economic development. The government used it to finance non-income-generating assets, further complicating the dire financial situation (Ziyad Bahaa el-Din, 2024).
<h3 dir="ltr">The debt burden deprives citizens&nbsp;</h3>
Due to successive borrowings and the conditionality of the loans, the government cut spending on social support, grants, and benefits to meet its debt obligations. The ratio of debt interest to total government expenditures increased by 37.4 percent over the past 10 years, while the government cut spending on social support, grants, and benefits to its citizens (Figure 2).
Figure 2: Debt Interest versus Expenditure
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1721812893imageFigure 2 Eng.png" alt="" width="629" height="472">
Source: Analytical statement of the draft general budget.&nbsp; FY&nbsp; 2017/2018 and 2023/ 2024 researcher accounts.&nbsp;
Allocating funds for debt repayment has led the government to slash spending on crucial sectors like health services and education, as shown in Figure (3). This is a clear violation of constitutional Articles 18 and 19, which mandate the state to allocate 3% of&nbsp; GDP to health and 4% to education, gradually increasing to meet international standards (constitution of 2014). A decade after the recent amendments, expenditure rates on education and health remain significantly lower than the constitutional entitlement. A stark comparison exists between expenditure on health and education in FY 2014/15 and 2023/24.
Figure 3: Percentages of spending on education and health of GDP
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1721813034imageFigure 3 Eng..png" alt="" width="629" height="537">
Source: Analytical statement of the draft general budget. Years 2017/2018 and 2023/2024 Researcher accounts.
<h3 dir="ltr">Fluctuating exchange rate slush savings</h3>
With the external debt crises and the pressure for repayment impacted, Egypt experienced multiple exchange rates in the first quarter of 2024. In November 2016, the Central Bank of Egypt devalued the Egyptian pound, decreasing purchasing power and increasing prices of goods and services. This devaluation and the rise in inflation caused individuals' standard of living to decline and an overall increase in the poverty rate (Nour El-Din &amp; Mohammed, 2018).
In 2024, people heavily resorted to the black market, as its exchange rate was 50% higher than the official rate. To resolve the crisis, the Central Bank of Egypt floated the pound, which slashed people&rsquo;s savings.
Egyptians' savings eroded with every new float. Assuming that an Egyptian citizen had EGP1 million in banking savings in January 2016, the value of his money has changed several times, with five floats the country has seen until last February's figure (4).&nbsp;
Figure 4: Savings Dip as Pound Floats (EGP1 million)
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1721824088imageFigure 4 Eng.png" alt="" width="629" height="454">
Source: Central Bank of Egypt; &nbsp;the researcher's accounts
<h3>No room for leisure</h3>
Although Egypt is a developing country that has suffered from external debt for long periods of its modern history (Mohamed, 2020), the current impact of indebtedness on people&rsquo;s lives is particularly sour. The rising debt and related annual installments and interests increased the per capita share of external debt in dollars from USD506.4 in 2013/14 to USD1,446.3 in 2022/23 (CBE, 2023). Debts and the devaluation resulting from the dollar shortage brought about inflation that impeded citizens&rsquo; ability to consume essential goods, including food and clothing. People chose to buy cheaper food varieties regardless of their impact on their health in the long run as nutrient-rich food became inaccessible. ​​People resorted to buying in installments, loans, and their savings to survive (Ihsan, 2023)
Due to the crisis, people consumed bad-quality food. The proportion of households consuming food from 12 food groups decreased from 8.4% in 2015 to 5.3% in 2018 (CAPMAS, 2022). For example, the average per capita share of red meat, which represents an essential item for Egyptians as a source of animal protein, stood at 8.4 kg/ year in 2019, falling below the annual WHO recommendations of 25.5 kg (Qutb &amp; Awaida, 2021).&nbsp;
UNICEF estimates that 65% of the total number of children in several countries, including Egypt, live in extreme food poverty because their families are unable to afford nutritious meals, and current social protection systems cannot reach them ( 2024). In Egypt, this unfortunate reality is most evident in families dispensing with the salad dish due to the increase in the cost of its components, which does not make it suitable for low incomes despite the urgent need for it as an essential nutritional component (Mada Masr, 2024).
The World Bank estimates that a 1 percent rise in food prices pushes half a million people into poverty (Laborde et al., 2019). According to a study conducted by the International Food Policy Research Institute (2024), 70% of the 6,000 Egyptian families who participated in the survey reduced their consumption of meat, eggs, and chicken due to high prices, and 50% resorted to eating smaller portions. People reduced spending on education and health care by rates ranging between 25 and 50%. Between 5% and 10% of families also sold household goods or assets they held as savings to cope with the price increase.
<h3>Conclusion</h3>
The worsening figures of external debt and their annual installments and interest repayments have hurt Egypt and increased its dependency on foreign loans. This resulted in the devaluation of the currency more than once over the past years, raising inflation figures and the prices of goods and services to levels that changed the consumption patterns of Egyptians. The recent influx of foreign currency liquidity in the form of loans and investments pumped into the country in 2024 did not improve citizens' living standards. They were temporary fixes to the government liquidity problem, which debt service will soon outstrip.
<hr>
References
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آراء

Commentaries

السياسة النقدية

Monetary Policy

الفقر

Poverty

السياسات الاقتصادية

Economic Policies

التنمية الشاملة

Inclusive Development

القروض للحكومة.. والديون للمواطنين

Egypt’s World of Loans Indebt Citizens

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