Cairo has lined up external credit worth $15bn to help it deal with Covid-19, but the debt will be sustainable only if there is a rapid recovery
The first hard indication of the extent of the damage inflicted by the coronavirus pandemic on Egypt’s finances came in early April, when the central bank released data showing that its foreign exchange reserves had fallen by US$5.3 billion during the previous month to $36.4bn (excluding gold). These reserves had been at a comfortable level for the past three years thanks to a combination of increased external borrowing, strong inflows of direct and indirect investment, and a steady rise in remittances and tourism revenue. The pandemic has forced Egypt to shut down foreign tourism, while remittances are set to fall, and portfolio investors have made a hasty exit. This has left external borrowing as the only feasible option to fill the financing gap.
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