WB Egypt's economic woes manageable

The World Bank said yesterday that Egypt was facing economic challenges in the wake of the September 11 attacks, but could deal with them thanks to its low levels of external debt.

Mahmoud Ayub, World Bank director for Egypt, was speaking at a briefing ahead of next month's donors meeting, when Egypt is expected to seek funds to help cover an estimated $2.4 billion current account shortfall for the financial year to June.

"I think it will be important to also not exaggerate the extent of the problem. There are difficult issues, but things are not unmanageable," he said.

The September attacks have hammered Egypt's key sources of hard currency, such as tourism, opening up a gap in the current account for which it is seeking support.

But Ayub said key issues such as debt levels were not a problem.

Egypt's debt, as you all know, is very manageable in terms of the size of the debt to the size of the GDP," he said, adding that external debt was about $27 billion, equivalent to about 27 percent of Gross Domestic Product.

"This makes it a very manageable debt thanks to the very cautious policy the government has had in borrowing, and thanks also to the good debt forgiveness that took place at the time of the Gulf War," he said.

International creditors slashed Egypt's external debts following the 1991 Gulf War.

Some analysts have said Egypt's debt was far less manageable because external and domestic public debt combined amounted to a much heftier proportion of GDP.

But others say domestic debt was stable because it was largely either held by banks to meet liquidity requirements or was owed by the government to state-owned bodies.

Ayub said the February 5-6 donors meeting at the Red Sea resort of Sharm el-Sheikh would give Egypt the opportunity to showcase its policies to overcome short-term challenges since September and its longer-term plans.

Those would include addressing issues such as private sector development, unemployment and social development.