Daily News Egypt understands that the Egyptian government plans to borrow EGP 1.106trn from the local market during the first quarter (1Q) of the fiscal year 2023/24, to pay dues of previous debt instruments and fund the state’s general budget deficit.
According to the government’s plan, the Ministry of Finance aims to issue 52 treasury bill (T-bill) issuances worth EGP 1.074trn, and 25 bond issuances worth EGP 32.75bn from July to September 2023, which reflects the government’s need for liquidity in the short term.
The Central Bank of Egypt (CBE), which undertakes this task on behalf of the government, will offer T-bills and bonds worth EGP 341bn in July, more issuances worth EGP 425.75bn in August, and others worth EGP 340bn in September.
According to the plan, the ministry is scheduled to offer T-bills worth EGP 295.5bn for a period of 91 days, EGP 243.5bn for a period of 182 days, EGP 224.5bn issuances for a period of 273 days, and EGP 310.5bn offer for 364 days.
It is also scheduled to offer bonds for three years at a value of EGP 29.75bn, including variable-yield bonds at a value of EGP 4.75bn, five-year bonds at a value of EGP 1.5bn, and for a period of seven years at a value of EGP 1.5bn. On the other hand, the Ministry of Finance canceled the offering of “zero coupon” bonds since the last quarter of 2022/2023.
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 “primary dealers” system in the “primary market”. Those banks resell part of the issuances in the “secondary market”, to local and foreign institutions and individuals.
The Ministry of Finance recently revealed that the volume of outstanding balances of local treasury bills and bonds amounted to about EGP 4.3trn in April 2023.
According to the latest report published by the ministry on its website, the volume of outstanding balances of treasury bills amounted to EGP 1.866trn, comprising about EGP 957.354bn for 364 days, about EGP 213.453bn for 273 days, about EGP 413.617bn for 182 days, and about EGP 282.513bn for 91 days.
The Ministry of Finance revealed that the volume of outstanding balances of treasury bonds in April amounted to EGP 2.433trn, of which about EGP 230.569bn are in “zero coupon” bonds, and about EGP 14.64bn in variable-yield bonds that the Ministry of Finance started offering recently.
The Cabinet has earlier approved the state budget for the next fiscal year 2023/24. 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, which is the highest primary surplus that is targeted in the framework of efforts to reduce government indebtedness as a percentage of GDP.
Maait stressed the government’s commitment to achieving financial discipline and reducing debt rates to less than 80% of GDP by 2026/27, despite the very difficult global economic challenges that cast a shadow on various countries, especially emerging economies, explaining that this was done during the fiscal year ending in June 2022. Achieving a primary surplus for the fifth year of 1.3% of GDP, instead of a primary deficit that lasted for more than 20 years.
The Minister of Finance said that if it had it not been for the change in the exchange rate of the Egyptian pound against the dollar, the debt to GDP would have decreased this year to less than 80%.
In addition, the Ministry of Finance revealed in the financial statement for the fiscal year 2023/2024 that it submitted to the House of Representatives earlier that it pursued a policy of diversifying funding sources between domestic and foreign debt instruments and markets. He pointed out that with the return of high domestic and global interest rates, the ministry returned to relying on short debt instruments.
The Ministry is working continuously to improve debt management and reduce risks related to refinancing through several main channels, represented by reducing debt burdens, extending debt life, and developing the stock market.
It pointed out that it helped develop and increase the life of debt and reduce financing needs. In addition, the balance of bonds evolved at rates higher than the rates of development of the balance of bills, as the balance of bonds in June 2022 reached 61% of the total outstanding balance of securities compared to 37% in June 2019, and 32% in June 2022.
