Egyptian government intends to borrow EGP 818bn in 1Q FY23

Daily News Egypt
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Egypt’s Ministry of Finance aims to offer 52 treasury bill (T-bill) issuances worth EGP 686.5bn and 39 bond issuances worth EGP 131.5bn from 1 July to 30 September 2022.

Data obtained by Daily News Egypt revealed the government’s intention to borrow EGP 818bn from the local market during the first quarter (1Q) of fiscal year (FY) 2022/23, with the aim of financing the state’s budget deficit.

The Central Bank of Egypt, which undertakes this task on behalf of the government, will issue T-bills and bonds worth EGP 251bn in July, to be followed by more issuances worth EGP 315bn in August, and issuances worth EGP 251bn in September.

According to the plan, the ministry is scheduled to issue offerings worth EGP 188bn for a term of 91 days, EGP 192bn for a term of 182 days, and EGP 100.5bn for a term of 273 days, while it is scheduled to offer 364-day T-bills worth EGP 206bn.

The Finance Ministry has also intensified the offering of short-term bonds significantly, as it is scheduled to issue “Zero Coupon” bonds, for 1.5 years, at a value of EGP 94bn.

The Ministry is also scheduled to offer 3-year bonds worth EGP 26.5bn, 5-year bonds worth EGP 6bn, 7-year bonds worth EGP 3.5bn, and 10-year bonds worth EGP 1.5bn.

The banks operating in the Egyptian market are the largest sectors investing in bonds and treasury bills, which the government periodically offers to cover the state’s budget deficit.

These bonds and bills are offered through 15 banks that participate in the primary dealers system in the primary market, and these banks resell part of them in the secondary market to individual investors and local and foreign institutions.

In the same context, the Ministry of Finance revealed that the volume of outstanding balances of domestic treasury bills and bonds reached about EGP 3.830trn in May 2022.

According to the latest report published by the ministry on its website, the volume of outstanding balances of treasury bills until the end of May amounted to about EGP 1.374trn, including EGP 858.77bn in 364-day bills, EGP 313.880bn in 273-day bills, EGP 115.252bn in 182-day bills, and EGP 86.627bn in 91-day bills.

According to the Finance Ministry, bids for T-bills amounting to about EGP 81.8613bn were due during last June, while the rest of the existing bids are due throughout the remainder of the current year until 30 May 2023, taking into account that other bills with the same deadlines are re-issued on a periodic weekly basis.

This comes as the Ministry of Finance revealed that the volume of outstanding balances of treasury bonds reached about EGP 2.455trn by the end of May 2022, of which about EGP 217.027bn are “Zero Coupon” bonds.

According to the Finance Ministry, bonds worth EGP 54.586bn were due in June, while the rest of the bonds are due from 11 August to 18 January 2037, taking into account also that other bond bids are re-issued on a periodic weekly basis.

Minister of Finance Mohamed Maait indicated in his recent statements that the state’s general budget during FY2022/2023 exceeds EGP 3trn, pointing out that its total expenditures reached about EGP 2.071trn, while the total estimated revenues were about EGP 1.518trn.

Maait said that the government aims during the new fiscal year to achieve a primary surplus of EGP 132bn at a rate of 1.5%, and reduce the total deficit to 6.1% of the GDP, compared to a total deficit of 12.5% ​​in June 2016, and put the debt rate on a sustainable downward path to reduce the debt rate to 84% of GDP compared to 103% at the end of June 2016, and reduce the debt service ratio to 7.6% of GDP, compared to 10% and 33.3% of budget expenditures, compared to 40% during the past three years, along with efforts to diversify sources of financing to reduce the cost of development and extend the life of the debt.

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