Figures obtained by Daily News Egypt revealed the government’s intention to borrow EGP 1.06275trn from the local market during the fourth quarter (4Q) of fiscal year 2022/2023, with the aim of financing the state budget deficit.
According to the government’s plan, the Ministry of Finance aims to issue 52 bond bids worth EGP 1.0335trn and 18 bond bids worth EGP 29.25bn in the period from 1 April to the end of June 2023, which reflects the government’s need for liquidity in the short term.
The Central Bank, which undertakes this task on behalf of the government, will offer bids in April for bills and treasury bonds worth EGP 326.75bn, bids worth EGP 409.25bn in May, and bids worth EGP 326.75bn in June.
According to the plan, the ministry is scheduled to issue bids worth EGP 295.5bn for a period of 91 days, EGP 211bn for a period of 182 days, and EGP 224.5bn for a period of 273 days, while it is scheduled to issue bills for a period of 364 days, at a value of EGP 302.5bn.
It is also scheduled to offer 3-year bonds worth EGP 27bn, including variable-yield bonds worth EGP 6bn, 5-year bonds worth EGP 1.5bn, and 7-year bonds worth EGP 750m, while the Ministry of Finance cancelled the zero coupon bonds in its new plan.
The banks operating in the Egyptian market are the largest sectors investing in bonds and treasury bills that the government offers periodically to cover the state budget deficit.
These bonds and bills are offered through 15 banks that participate in the system of “primary dealers” in the “primary market”, and those banks resell part of them in the “secondary market”, to individual and local and foreign institutional investors.
The Ministry of Finance recently revealed that the volume of outstanding balances of local treasury bills and bonds amounted to about EGP 4.44trn in February 2023.
According to the latest report published by the ministry on its website, the volume of outstanding balances of treasury bills amounted to about EGP 1.94trn, with about EGP 860.842bn for 364-day bills, about EGP 138.748bn for 273-day bills, and about EGP 474.867bn for 182-day bills, in addition to about EGP 466.336bn in 91-day bills.
This comes as the volume of outstanding balances of treasury bonds in February amounted to about EGP 2.5trn , of which about EGP 260.135bn in “zero coupon” bonds, and about EGP 13.384bn in variable-yield bonds that the Ministry of Finance recently started offering.
Mohamed Maait, Minister of Finance, had indicated in his recent statements that the government aims in the fiscal year 2022/2023 to achieve a first surplus of EGP 132bn, or 1.5% of the gross domestic product, and to reduce the total deficit to 6.1% of the gross domestic product. The debt is on a sustainable downward trajectory, reaching less than 75% of GDP over the next four years. It also aims to reduce the debt rate to 84% of GDP, and reduce the debt service ratio to 7.6% of GDP and 33.3% of budget expenditures, along with efforts to diversify financing sources to reduce development costs and extend debt life.
In its meeting held last Wednesday, the Cabinet approved the budget for the next fiscal year 2023/2024.
Mohamed Maait, Minister of Finance, said that in light of the budget estimates, which include targeted reform measures, the primary surplus is expected to reach 2.5% of GDP; it is the highest primary surplus targeted in the framework of efforts to reduce government indebtedness as a percentage of GDP, indicating that the new budget estimated the inflation rate at 16%.