Egypt Considers Bond Sale Delay as It Eyes Market Conditions

 

Egypt may delay a planned sale of 1.5 billion in euro-denominated bonds to early 2018, as the government pushes ahead with a sweeping reform program that has boosted foreign inflows but sent prices soaring in the nation of 95 million.

“We are studying market conditions to see if we are going to be able to sell bonds before the holiday season in December,” Finance Minister Amr El-Garhy said Tuesday in Cairo, adding that the government plans to begin the new bond program with U.S. dollar-denominated debt before moving onto euro-denominated bonds. “My guess is that the sale will happen in January, February — starting with the USD bonds then the EURO ones.”

The government in late September approved a $7 billion international bond program for fiscal year 2017-2018, and initially had planned to move ahead with the euro-denominated bonds ahead of the start of 2018 as it sought cheaper financing abroad to plug its budget gap. The International Monetary Fund last month said an expected $2 billion financing gap after Egypt receives the next installment of the fund’s $12 billion loan package should be covered by external sources.

El-Garhy said a request for a proposal for the U.S. dollar-denominated bonds was likely, while the government had yet to decide if it will hold a tender for the euro-denominated debt issuance. Officials are likely to choose European advisers for the euro-denominated bonds, he said.

November Flotation

Egypt’s reform program, whose centerpiece was the November flotation of the currency followed by two rounds of fuel and electricity price increases, has come at a hefty price domestically in a nation where around half of the population lives on or near the poverty line. Annual core inflation remains over 30 percent — near record highs.

Still, it has largely accomplished what the government intended. It helped reverse what had been a crippling dollar shortage and a hemorrhaging of the nation’s foreign currency reserves that have now rebounded to new highs of over $36 billion. Equally importantly, it helped secure the three-year IMF loan and shore up investor confidence that had eroded after the 2011 uprising that ousted President Hosni Mubarak from power.

Foreign holdings of Egyptian Treasury bills reached $17.9 billion by the end of September, Deputy Finance Minister Ahmed Kouchouk said in a news conference. The steady rise in foreign holdings of Egyptian debt has been fueled by rates of around 20 percent that have lured in investors. El-Garhy said the government could see interest expense reaching 410 billion pounds in fiscal 2017-2018.

At the same time, the country’s foreign debt load has also been climbing, rising to $79 billion in June versus $55.8 billion a year earlier, according to central bank figures.

 

Source : Bloomberg

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