An agreement between Egypt and China to swap debts... and new investments worth more than 15 billion dollars

Egypt continues to enhance economic cooperation with China, which recently agreed to a debt swap program with Cairo for the first time in its history, and Chinese companies announced pumping investments of more than $15 billion in green fuel production and manufacturing, in addition to providing soft financing to establish the third and fourth phases of the train project. Light electrician.

Panda bonds worth CNY 3.5 billion

These agreements were preceded by Egypt's offering of Panda bonds worth 3.5 billion Chinese yuan, equivalent to more than $478 million. At a time when experts stressed the importance of this cooperation in attracting huge investments that contribute to increasing the growth rates of the national economy, reducing pressure on foreign exchange, and enhancing trade exchange.

On the sidelines of Egypt's participation in the Belt and Road Forum last weekend, the Ministry of International Cooperation signed a memorandum of understanding in the field of debt swaps with the Chinese International Development Cooperation Agency, making Egypt the first country to conclude this agreement with the agency.

Engineer Majd Al-Manzalawy, Chairman of the Executive Board of Trustees of the Egyptian-Chinese Businessmen Foundation, said that signing the debt swap agreement between Egypt and China contributes to relieving pressure on Cairo’s commitment to repay short-term debts by directing part of the debts owed to China, amounting to $8 billion, to finance development projects in the currency. Locally, which contributes to increasing the growth rate of the Egyptian economy, and reducing pressure on the dollar to pay international obligations during the next three years.

Foreign exchange

Al-Manzalawi added that Egypt faces a challenge in paying installments and interests on huge debts in the short term, which requires it to increase its foreign exchange resources and search for alternatives with development partners to support it in overcoming this challenge.

Debt swap

Debt swap is a mechanism for using debt in local currency to finance development projects agreed upon between the two parties. This agreement contributes to enhancing the financing available for development projects, with the aim of reducing the burden of external debt and achieving sustainable development through financing priority projects.

Al-Manzalawi said, in press statements, that the agreement also contributes to enhancing trade exchange and increasing Chinese investments in Egypt, especially in light of Egypt’s accession to the BRICS countries starting next January, which allows for a currency swap mechanism in economic cooperation, in addition to Egypt’s contribution to BRICS Bank, which allows Egypt to obtain soft financing to finance infrastructure projects.

BRICS

Last February, the Egyptian Parliament approved an agreement for Egypt’s contribution to the New Development Bank of the BRICS group, at a value of 1.196 billion US dollars, of which 20% was paid, with a total amount of 239.2 million dollars, making Egypt the highest contribution value by a non-founding country to the bank, representing 2.1% of the voting power to the bank.

The signing of the memorandum of understanding comes in light of the desire of the two countries to explore new horizons and areas of cooperation, in order to enhance the comprehensive strategic partnership between the two countries.

It should be noted that Egypt has been involved in partnership with Italy since 2001 and Germany since 2011 in implementing debt swap programs in exchange for implementing development projects, to enhance the state’s efforts to achieve comprehensive development, according to a statement by the Egyptian Council of Ministers.