Mohamed Maait, Egypt’s Finance Minister, recently issued a decision to enhance the “Primary Dealers” system for government debt instruments. These primary dealers play a crucial role as market makers in both the primary and secondary markets. The primary objective of this initiative is to invigorate the government securities market while simultaneously reducing the burden of debt service. To achieve this, the Ministry of Finance has introduced a range of incentives for these dealers.
The decision aligns with the Ministry’s strategic goals, emphasizing balanced debt portfolio management. By optimizing the primary issuance market, the cost of servicing government debt can be minimized, and refinancing risks mitigated. Importantly, this approach ensures that the state budget’s funding requirements are met effectively.
Key features of the enhanced system include:
- Non-Competitive Bids and Joint Financing: The primary market for local government securities now offers non-competitive bids and joint financing operations. This move aims to stimulate activity in the secondary market.
- Priority for Primary Dealers: Primary dealers receive priority when submitting bids in the primary issuance market. This applies to bids for their portfolios or on behalf of primary market clients. Their role is critical in expanding the investor base to include individual investors in government securities.
- Commission-Based Model: Primary dealers earn commissions based on accepted quantities for their clients. This incentivizes their active participation and commitment to covering government securities tenders.
- Transparency and Recognition: The Ministry of Finance will publish a semi-annual report on its website, highlighting the top-performing primary dealers in both primary and secondary markets for local government securities. This transparency initiative aims to enhance the market value of these dealers.
By fostering a robust and efficient government securities market, Egypt aims to attract diverse investor segments and strengthen its financial landscape. Individuals, too, can now participate more actively in government debt instruments.
