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The Finance Ministry has raised its local debt target for October to EGP 845 bn, up from EGP 833 bn in September, a government source told EnterpriseAM. The increase comes on the back of strong investor appetite for government-backed treasury bills and bonds in both primary and secondary markets, following the recent decline in interest rates across the country.
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Local banks are taking the lion’s share: Demand from Egypt’s banking sector for local debt instruments has grown more than that from foreign investors in the current period, thanks to improvements in the economic landscape and the USD / EGP exchange rate, as well as shrinking yields within the banking system, the source explained. The higher demand for local debt coverage from banks was driven by a rise in individual investments in debt instruments through their banks, who are offering them as an alternative investment option amid falling returns on other savings instruments, the source said.
Long-term t-bills make up the larger share of the targeted issuances, as a part of the government’s efforts to extend the average maturity of public debt, the source added.
An overview of the latest t-bill auctions: During last Thursday and Sunday’s t-bill auctions the central bank sold EGP 228.4 bn worth of t-bills — up 29.8% from the targeted EGP 176 bn, according to the bank’s website. The bills were sold at an average yield ranging between 25.59% and 26.79%.
The Finance Ministry is now working to reduce the number of new issuances by reopening issuances for two, three, and five-year bonds instead of offering new ones.
REMEMBER- The Finance Ministry is planning to unveil its new public debt strategy this December. The strategy aims to bring public debt down to below 75% of GDP within three years, from 85% in the last fiscal year, while cutting debt servicing costs to 7% of GDP and extending debt maturity to five years.
The budget deficitis expected to narrow to7.3%of GDP this fiscal year, down from an estimated 7.6% last fiscal year. Meanwhile, the financing gap for the current fiscal year is estimated at around EGP 3.6 tn. To that end, the Finance Ministry plans to issue fresh local debt instruments worth EGP 3.2 tn — EGP 2.2 tn in t-bills and around EGP 928.9 bn in t-bonds — according to official figures seen by EnterpriseAM.
