Soaring interest rates on public debt in Egyptian pounds (EGP) have pushed the government to resort to issuing debt instruments in US dollars to support the cash reserve and to escape the standard interest rate on the Egyptian pound.
An official in the Ministry of Finance in charge of managing public debt said that banks had offered liquidity in dollars to the Ministry and increased pressure on the Ministry to move by preparing one year treasury bills at the value offered by the banks, equalling $ 526mn with an added interest of 3.7 percent, noting that the offer is very attractive in the face of the astronomical mounting prices associated with borrowing on the Egyptian pound.
The source added that the banks overvalued in raising interest rates because of the return of the millioneyat, or million man marches, political strikes and other factors that led to the focus of lending on public banks that cover Ministry of Finance bids to instruments of public debt as opposed to weak participation from the rest of the commercial banks from the main dealers.
He said that last week the Ministry had refused to borrow LE 3 bn to control the raging interest rate and attempt to stabilize the average interest rates, especially as the financial requirements for the last quarter of the current fiscal year are LE 150 bn, which the government cannot obtain as a result of high interest rates.
The value of the US dollar is the highest it has been for the past seven years. Mohamed Rostom from the International Transactions division of the National Bank for Development said “The current disorder and international bills we have to work together to raise the price of the dollar.” He also said that the rise of the rate of exchange of the dollar locally will raise interest rates on international treasury bills in the future.