SHARM EL-SHEIKH, Egypt: The Egyptian government has started talks with investment banks on the possibility of issuing bonds abroad denominated in Egyptian pounds, Investment Minister Mahmoud Mohieddin said in an interview on Sunday. It could be something like 500 million euros or dollars and this I think is going to be taken very positively by the markets, he told Reuters on the sidelines of the World Economic Forum in Sharm El-Sheikh. He said that, for the Egyptian government, the bonds would have the advantage that it need not pay as high an interest rate as in the domestic market and would eliminate the foreign exchange risk associated with dollar bonds, he added. Egypt is paying rates between 8 and 11.6 percent on existing medium and long-term bonds. Recent one-year bonds yield about 8.6 percent and draw considerable foreign interest, given the stability of the Egyptian pound for the past 18 months. Another positive aspect is that many triple-A agencies are interested in issuing bonds in the domestic market to finance their activities in project finances. This is a good sign of the soundness of the domestic fixed-income market, Mohieddin said.
The World Bank, the European Investment Bank and the African Development Bank are among the institutions interested in the idea, said a senior official who asked not to be named. Mohieddin, who is responsible for Egypt s privatization program, said the next big step in the process, the sale of state-owned Bank of Alexandria, would be complete by the end of 2006. The government is looking for a large strategic investor for the bank, the smallest of the big four public-sector banks, and several foreign banks have expressed interest in buying it. The government is also planning to sell Midor, which runs a 100,000 barrel-a-day oil refinery, through a mix involving a strategic investor, an initial public offering and a private placement, he added. The Ministry of Petroleum, which now controls the whole company, might retain a 15 to 20 percent stake, Mohieddein said. We are expected to finalize the contract with Merrill Lynch and Morgan Stanley before the end of the month, he added. The pace of privatization has slowed after an initial burst which raised LE 20 billion ($3.5 billion) in 2005. The government s budget for the 2006/07 financial year, which starts on July 1, assumes that receipts from privatization will be LE 10 billion, he said.