The Impact of External Debt on the Egyptian Balance of Payments during the period (2003-2022)

Abstract

This study aimed to analyse and estimate the impact of external debt on the Egyptian balance of payments during the period (2003-2022). The research employed a descriptive-analytical approach and utilised

the Autoregressive Distributed Lag (ARDL) model, using quarterly data for the model variables. The study concluded that external debt inflows lacked productive impact. The ARDL estimation results showed that the external debt to GDP ratio, net unilateral current transfers, and net foreign direct investment positively impacted the balance of payments. In contrast, the external debt service to exports ratio, the trade openness index, and the exchange rate negatively impacted the balance of payments. Therefore, the study recommends several actions: investing borrowed funds in export-oriented projects, negotiating the rescheduling of external debt, or converting part of it into investments in the tourism sector—an area where Egypt holds a competitive advantage. Additionally, it is essential to establish a limit on foreign borrowing that aligns with the economy's repayment capacity.