Egypt signals it's ready to issue Eurobonds — and other issuances — for the first time since 2021: Finance Minister Ahmed Kouchouk told foreign investors in London last week that Egypt was set to issue USD 3 bn in Eurobonds and other debt instruments in the current fiscal year coming to a close at the end of June, Bloomberg reports, citing sources it says are familiar with the matter. Kouchouk did not reportedly provide a breakdown of how the total USD 3 bn would be issued.

Eurobond issuances are in the pipeline — but not until at least February: The government is not planning to issue international bonds on global stock exchanges before February, a government source told Enterprise, commenting on the recent Bloomberg story.

Remember: The government last issued Eurobonds in late 2021, selling USD 6.75 bn in bonds across two issuances in February and September. Since then, high global interest rates and domestic currency market instability have discouraged the issuance of USD-denominated debt on international markets. However, the US Federal Reserve’s decision to cut rates a full half a percentage point last week — a sign of the beginning of the end of globally high interest rates — may augur a revival of capital flows to emerging markets.

THE GOVERNMENT’S PLAN-

Three possible paths of re-entry to international debt markets: The source clarified that the government is considering re-entering international markets in three possible ways. First, it may issue USD-denominated bonds of up to USD 1 bn in an initial phase, then issue more depending on demand and the interest rates offered. Second, the government may issue sukuk, given growing demand for the instruments. Third, it may issue bonds supported by guarantees from international financial institutions like the IMF and the BRICS’ New Development Bank to reduce interest rates.

ING THE WATERS-

Discussions in London were preliminary: The source clarified that Finance Minister Ahmed Kouchouk’s visit to London was a door-knocking mission aimed at understanding international market perceptions of the Egyptian economy, the source said, in part by presenting different alternatives related to financing and investment in order to solicit feedback and discussion.

The Fed’s rate cut played a role in discussions: The source noted that the Fed’s decision to lower interest rates by half a percentage point last week allowed the Egyptian delegation to present the prospect of issuing new foreign currency-denominated bonds on international markets, as part of a broader plan to direct investments toward the Egyptian economy and support foreign investments in both local and foreign debt instruments.

DIVERSIFYING DEBT INSTRUMENTS-

The gov’t is aiming to diversify instruments to bring debt costs down: The key to reducing the cost of public debt is diversifying debt instruments and lowering interest rates by introducing innovative debt tools that attract more investors to the local market, the source told Enterprise. Egypt plans to restructure its local debt offerings by introducing new instruments before the beginning of 2025, the source said.

We’ve heard about these diversifying debt instruments from Kouchouk before: At his first presser as finance minister in August, Kouchouk noted that the ministry would be looking to expand its debt instruments like treasury bonds, green bonds, and sukuk — as well as taking out soft loans from our multilateral partners.

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