Egypt : The Debt Crisis That No One is Talking About

Egypt is trying to follow in the footsteps of China and Dubai by funding megaprojects. This is causing a few issues including, most notably, the fact that their federal budget is now almost sixty percent dedicated to paying their debt obligations. This episode goes over how they got there. The Turkish financial crisis has received extensive media attention as the Lira has plunged and harsh words exchanged between Presidents Erdogan and Trump. This crisis is playing out against a backdrop of deterioration of the currencies and even broader economies of many emerging market countries, resulting primarily from globally rising interest rates accompanied by an appreciating dollar. Even the Chinese Renminbi has come under pressure, leading among other things to accelerating capital flight, a problem of concern in GCC economies as well. In most emerging markets the interrelated debt and currency crises stem from the shift from borrowing in domestic currencies, to seeking loans in dollars and euros - a shift that commenced several years ago in response to lower interest rates for those hard currencies. The primary lesson of the 1997 Asian crisis, brought on by the collapse of the Thai Baht due to similar foreign borrowing, was forgotten. 2018-19 could witness a similar financial meltdown. Curiously, Egypt has remained below the horizon in most media reports on countries confronting debt and currency crises. This is due primarily to global financial institutions - led by the IMF, which in 2016 extended a $12 billion loan to the country, accompanied by the US, European countries, Russia and even China all seeking to portray the Egyptian economy in rosier terms than it deserves.










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