Green financing...ِA new window that enhances the flow of dollars to the Egyptian market

During the current period, the Egyptian government is using green financing, as a new window for the flow of foreign currency, especially the dollar, into the local market, which experts considered a positive step, as its cost is cheap and not high.

Egypt is preparing to launch carbon certificates on global markets with the help of the World Bank to promote them, after the country announced the launch of the voluntary African market for trading carbon emission reduction certificates, which will begin trading next year.

Sustainable bonds

The government is also betting on benefiting from the incentives available through the presence of a mandatory carbon market, as it is a sustainable source of attracting investments to Egypt by offering surplus certificates for sale in global markets.

The Egyptian Ministry of Finance also plans to offer what it calls “sustainable bonds,” which vary between green and blue bonds, during the next year to raise up to about one billion dollars.

Economist Dr. Yasser Amara said that the most prominent characteristic of green financing instruments is that they are low in cost in terms of interest, and their burden is the payment of installments, but they are long in duration, which gives the authorities an opportunity to repay with no chance of default.

Dollar gap

He added that green financing comes within the framework of diversifying borrowing and is a positive means for the government to cover the dollar gap in the country. It is a tool whose cost is not very high, provided that it is diversified, compared to limiting financing with traditional debt instruments, which have become unsuitable with the rise in global interest rates.

The rise in traditional borrowing costs has put pressure on public finances, as the budget deficit widened to 3.9% of GDP in the first quarter of the current fiscal year 2023-2024 from 2.1% in the same period last year, driven by the increasing interest bill.

Economic analyst Dr. Sayed Khadr said that borrowing in general is a bad tool and has a negative impact on the economy, but avoiding borrowing dollars is the most prominent factor in this new government step, agreeing that green financing is a positive tool for the flow of hard currency.

Currency support

He added that borrowing is the most effective way to support the local currency and confront the parallel market, but that does not justify not focusing on attracting foreign investments, which is an important factor for the sustainability of the hard currency in the country.

He called on the Egyptian government to negotiate an extension of the terms of the debts and bonds that it offers on global markets, so that it is a supportive step for the currency or the economy and so that it does not constitute greater pressure on external debt in the short term.