- Total external debt: $34.4 billion
- Total external debt payments: gives $2.5 billion each year to the rich world in debt payments.
- Population: 74 million
- Percentage of adults who can read and write: 71.4%
- Average life expectancy: 70.7 years
- HIV prevalence: less than 0.1%
- Total health spending: 2.4% of GDP (2003)
- Total spending on debt service payments: 2.8% of GDP
- Annual GDP: $89.4 billion
(Statistics from World Bank, 2005, and UN Human Development Report, 2005)
Egypt lies in Northern Africa bordering the Mediterranean Sea, and in between Libya and the Gaza Strip, with the Red Sea to its West. The vast majority of Egypt is desert plateau, except for the River Nile and the surrounding delta areas. Egypt is rich in natural resources and has a large export trade in petroleum and cotton.
Egypt was home to one of the world’s oldest civilisations, the first recorded civilisation was around 3200 BC. This is partly due to the natural richness of the land, including the regularity of the Nile floods and the isolation of the desert areas. Egypt has played a major role in Middle Eastern politics in recent years. Egypt fought with Israel three times in 1948, 1967 and 1973, and eventually sought peace in 1979 with them, this has seen Egypt move from a warring nation to a key player in the peace process. President Hosni Mubarak has been in power since 1981 when his predecessor was assassinated; the State of Emergency then declared is routinely renewed and still in force today, despite increased opposition. Mubarak’s strongest challenger is the Muslim Brotherhood which is tolerated but officially banned. Islamic groups have continued their campaigns sporadically, being responsible for deadly attacks that have often targeted tourists and resort areas.
Where has the debt come from?
Egypt’s debt problems stretch back as far as the rule of Muhammed Ali in the 1800s. Ali borrowed huge sums to try and finance extravagant and ambitious development projects, which never materialised. Egypt was unable to repay all these debts and over time they increased significantly. Most of the debts that Egypt had were owed to Britain, and as the money was not being repaid, and there was little or no chance of it ever being, the British used this as an excuse to occupy Egypt for the next 50 years.
After World War II, Egypt had accumulated a surplus of capital and debt levels only began to become unsustainable once more under the rule of the previous president, Sadat, and the current President Mubarak. Public debt grew five-fold in the late 1970s, the time when many countries’ debts began to balloon, with cheap lending following the flooding of money markets. The global interest rate rises and commodity price falls that ensued, meant that debts spiralled. Egypt negotiated restructurings of its bilateral debt at the Paris Club, in return for IMF reforms, including budget cuts and privatising state-owned enterprises.
Egypt continues to face economic challenges, including poverty, with 17% of the population living in extreme poverty (mainly in Upper Egypt and rural areas), unemployment and high levels of debt. Egypt is one country facing a high level of domestic debt, which isn’t counted by the international financial institutions in determining its debt sustainability. Domestic debt was at 90% of GDP in September 2006.
Debt cancellation status
Egypt is officially classed as a lower middle-income country by the World Bank. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. Nor is it eligible for additional debt relief from the UK or other bilateral donors. This is regardless of the size of its external debt in comparison to the value of exports, its domestic debt or what Egypt needs to spend on tackling poverty.
The New Economics Foundation (2007) calculates that Egypt requires 62% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.