The government plans to borrow EGP 281.5bn to finance the state budget deficit during the second quarter of the new fiscal year 2015/2016, according to a plan prepared by the Ministry of Finance in coordination with the Central Bank of Egypt (CBE).

The finance ministry’s plan, of which Daily News Egypt obtained a copy, was given to a number of banks operating in the domestic market last week. It revealed that the government plans to issue treasury bills worth EGP 199.5bn as well as treasury bonds worth EGP 82bn from October to the end of December.

The CBE will put forward bids for treasury bills and bonds worth EGP 86bn in October. In November, the CBE will organise bids worth of EGP 86bn, and it will launch bids valued at EGP 109.2bn in December.

According to the plan, different bid forms are to be launched for 91-day treasury bills worth EGP 37bn, 182-day treasury bills worth EGP 45.5bn, 273-day treasury bills worth EGP 58.5bn, and 364-day treasury bills worth EGP 58.5bn.

The plan also zero-coupon bonds of 18 months worth EGP 14bn, three-year bonds worth EGP 12bn and maturing in September 2018, as well as bonds worth EGP 9bn that will mature in December 2018.

The government, during the period between October and December 2015, will also launch five-year bonds worth EGP 3bn and maturing in November 2020, as well as another set of five-year bonds worth EGP 15bn and maturing in October 2020.

The plan also includes seven-year bonds worth EGP 9bn and maturing in August 2022, in addition to seven-year bonds worth EGP 6.5bn and maturing in December 2022. The government will put forward 10-year bonds maturing in November 2025 worth EGP 9bn, as well as another set worth EGP 4.5bn and maturing in December 2025.

The government has been launching treasury bills and bonds to the domestic market via 15 banks, which then sell part of these bills and bonds to their customers from local and foreign individuals and institutions.

Those banks include the National Bank of Egypt, Banque Misr, Banque du Caire, Bank of Alexandria, Commercial International Bank (CIB), Arab African International Bank, Export Development Bank, QNB Alahli, Suez Canal Bank, Misr Iran Development Bank, Crédit Agricole, Citibank, Arab Bank, HSBC Bank, and Barclays Bank.

The government during the first quarter of the current fiscal year 2015/2016 had issued bids on treasury bills and bonds worth EGP 262bn, of which EGP 190m were treasury bills.

In the previous fiscal year 2014/2015 the government issued bills and bonds worth EGP 918.367bn. EGP 217.254bn worth were launched during the first quarter of the year, June-August 2014, EGP 214.5bn worth in the second quarter in September-October 2014, and EGP 237.613bn in the third quarter in January-March 2015, in addition to about EGP 249bn in the fourth quarter, April-June 2015.

The government, represented by the Ministry of Finance, resorts to launching bills and bonds in the local market to cover the growing deficit in the state budget which amounts to about EGP 251bn in the 2015/2016 budget, according to the latest estimates by the Ministry of Finance. The government also launched bills and bonds to pay due balances to investors, banks and others, in treasury bills and bonds raised earlier.

According to the CBE, the total outstanding balances of treasury bonds and bills put forward by the government over the past years and until the end of last June has reached to about EGP 1.128tr, of which about EGP 597bn were in bonds, and EGP 531.543bn were in treasury bills.

State, commercial and private banks, and branches of foreign banks operating in the Egyptian market account for about 80% of the total launched bills as well as the largest share of bonds.

Banks’ investment funds are the most prominent investors in treasury bills and bonds as well.

Credit rating agency Moody’s had warned banks in Egypt last week that focusing their investments in governmental debt instruments makes them vulnerable to credit risk.

Moody’s noted that 44% of the total assets’ of banks operating in Egypt are invested in government debt instruments since last May.