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Gov’t ramps up borrowing target for the month: The Finance Ministry has upped its monthly borrowing target for September to EGP 838 bn, a 25% jump from August’s EGP 670 bn, a government source told EnterpriseAM. This move comes in response to the heightened demand from investors for local debt instruments.
To set the scene: Foreign investors have recently funneled an unprecedented amount of FX inflows into public debt instruments, with their holdings reaching USD 40 bn by the end of July, compared to USD 38 bn by the end of March.
The past few months saw significant inflows into the public debt market, largely fueled by growing positive momentum in the economy and strong FDI and tourism revenues, our source noted. These factors, our source said, have improved economic indicators, positioning the country as the top destination for foreign investments in debt markets.
The country recorded its highest-ever monthly USD inflows in July, coming in at USD 8.5 bn, Prime Minister Moustafa Madbouly said last week. These inflows excluded hot money.
The local market remains attractive for hot money inflows, despite the resumption of the monetary easing cycle, the source said, emphasizing that all local and external factors support our local debt market.
ICYMI- The Central Bank of Egypt cut interest rates by 200 bps on Thursday. The overnight deposit rate now stands at 22.0%, the overnight lending rate at 23.0%, and the main operation and disc. rates at 22.5%.
Our debt market is highly attractive due to several key reasons — exchange rate stability, improved growth indicators, and reduced risk due to government guarantees on debt instruments, banking expert Mohamed Abdel Aal told us. Global anticipation of interest rate cuts is also one of the catalysts for the significant inflows expected in the near future, Abdel Aal added.
The government has been careful not to use hot money proceeds to finance medium-term assets, Abdel Aal said. Instead, it uses these returns for short-term financing operations, such as import credits for production input and other goods, which are then paid for from export revenues.
We’re awaiting the new debt strategy: The Finance Ministry is working on its new public debt strategy for 2025-2030, which government sources have previously told us could be released during 1Q FY 2025-2026. The strategy aims to diversify the country's public debt instruments and introduce new ones, seeking to secure funding with varied and more competitive interest rates.
