Egypt will pay back about $6 billion it owes to energy companies, including with proceeds from a bond sale that’s to take place “very soon,” the country’s finance minister said.
“We appreciate the patience and we expect them to hold up with us for a little bit longer, but it’s coming soon,” Hany Kadry Dimian said of the payment in an interview in Washington yesterday. “They’ve benefited well from investing in the country and we expect equally that when the economy is undergoing hardship, they stand shoulder to shoulder with us.”
Dimian said the government will pay for part of the arrears with savings from a recent reduction in fuel subsidies. Egypt will also issue an international bond and is seeking a guarantee from a country with a high credit rating for the sale, he said, declining to say how much will be raised. He also cited capital inflows as “possible resources” to meet the payments, without elaborating.
Egypt ran up the debts to companies including BG Group Plc and Dana Gas PJSC as its public finances deteriorated amid the political turmoil that followed the uprising of 2011. President Abdel-Fattah El-Sisi, the former army chief who was elected in May after leading the ouster of an Islamist government, has vowed to repair the economy. Last month, he raised fuel prices by as much as 78 percent, saying the measure was needed to save a nation “drowning in debt.”
“Confidence in the sustainability of the Egyptian economy was lost,” Dimian said. “Now we are in the process of rebuilding that confidence.”
He said the country is organizing an international conference with investors and government officials, tentatively planned for November.
The government, which had been spending about 25 percent of the budget on subsidies, plans to narrow its deficit to 10 percent of gross domestic product this fiscal year. Last year it was about 15 percent if grants from Egypt’s Gulf allies aren’t included, or 12 to 12.5 percent if they are, Dimian said.
The fiscal tightening, which includes tax increases on high incomes and investor profits, will be less steep in subsequent years, as the government plans to double spending on education, he said.
Egypt has repeatedly engaged in loan talks with the International Monetary Fund since 2011, without concluding a deal. Since the ouster of President Mohamed Mursi in July last year, Saudi Arabia, the United Arab Emirates and Kuwait have pledged about $15 billion in aid, helping to stem the drop in the country’s foreign-currency reserves.
Egypt is still open to “any kind of cooperation” with the IMF that will “benefit the country, at the right time, and in the right framework and magnitude,” Dimian said. He said the government will invite the Fund to carry out an assessment of its economy, an annual obligation of all member countries that Egypt hasn’t fulfilled since 2010 according to the IMF website.