On Egypt’s supposed odious debt

The other day I linked to an article by Saifedean Ammous, a lecturer in economics at AUB, titled Egypt’s Odious Debts. It argued:

A glance at Egypt’s public finances reveals a disturbing fact: the interest that the country pays on its foreign loans is larger than its budget for education, healthcare, and housing combined. Indeed, these debt-service costs alone account for 22% of the Egyptian government’s total expenditures.

I mentioned in passing that this is wrong, Egypt’s biggest problem is domestic, not foreign, debt. Just take a look at the budget: it pretty clearly shows that Foreign interest expense was EGP2.8 billion in FY2009/10 (less than 1% of budget sector expenditures) and an estimated EGP3.4 billion (again less than 1%) in the year just ended. Whereas domestic interest expense was EGP69.5 billion in FY2009/10 (19% of spending) and EGP77.7 billion (20% of spending) last year.

I am sympathetic to odious debt arguments — I backed them in the case of Saddam’s Iraq — but it’s not worth making them if the facts aren’t there to back them. Canceling Egypt’s foreign debt might help, but it would be just the tip of iceberg. And if Egypt declared local debt odious, it would mean the collapse of the local banking system and their recapitalization at massive cost. It’s no solution.

I’m just surprised this economist does not appear to have done the homework.