The Egyptian government plans to borrow EGP 1.2635tn from the local market in the second quarter (Q2) of fiscal year (FY) 2023/24. This borrowing will be used to pay off previous debt maturities and fund the state’s general budget deficit, according to information obtained by Daily News Egypt.
Egypt’s Ministry of Finance aims to issue 52 T-bond tenders worth EGP 1.186tn and 26 T-bond bids worth EGP 41.5bn between October and December 2023. This reflects the government’s need for short-term liquidity.
In October, the Central Bank of Egypt (CBE), acting on behalf of the government, will issue bids for treasury bills and T-bonds worth EGP 486bn. In November and December, bids worth EGP 388.750bn will be issued for each month.
The ministry also plans to issue tenders for T-bills with terms of 91 days (EGP 295.500bn), 182 days (EGP 256.500bn), and 273 days (EGP 322bn). Additionally, 364-day T-bills worth EGP 348bn will be offered.
Furthermore, the ministry will offer three-year bonds worth EGP 40bn, including variable-return bonds worth EGP 4.5bn, and five-year bonds worth EGP 1.5bn. Bonds with longer terms and zero coupon bonds have been discontinued since the last quarter of 2022/2023.
Banks in the Egyptian market are the largest investors in treasury bonds and bills. These government securities are offered through 15 banks participating in the “primary dealers” system in the primary market. Some of these banks resell a portion of the securities in the secondary market to individual investors and local and foreign institutions.
As of the end of August 2023, the volume of outstanding balances of local treasury bills and bonds was approximately EGP 4.67tn. The volume of outstanding balances for treasury bills was EGP 2.449tn, with EGP 1.188tn in 364-day bills, EGP 210.512bn in 273-day bills, EGP 524.811bn in 182-day bills, and EGP 525.698bn in 91-day bills.
The volume of outstanding balances for treasury bonds was approximately EGP 2.250tn, including EGP 114.122bn in “Zero Coupon” bonds and EGP 28.147bn in variable-return bonds.
Mohamed Maait, Egypt’s Minister of Finance, has stated that the government is working to reduce the debt-to-GDP ratio by extending the average life of the debt and reducing the cost of servicing it. The debt-to-GDP ratio decreased from 159% in fiscal year 1980/1981 to 95.7% in June 2023, with a target of further decreasing it to 75% by 2027. The government is also diversifying funding sources by entering new markets and offering low-cost financing tools.
Maait highlighted the decrease in the budget deficit rate to GDP from 13.8% in fiscal year 1981/1982 to 6% in June 2023, with an expected decrease to 5% by June 2027. Egypt achieved a primary surplus in fiscal year 2017/2018, which has been maintained for six years and reached 1.6% of GDP in fiscal year 2022/2023. The aim for fiscal year 2023/2024 is to achieve the largest primary surplus in Egypt’s history, at about 2.5%.
