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The Mabdouly government is preparing a new incentive package and regulatory tweaks in a bid to start curbing our reliance on the hottest of hot money flows. The package of measures includes changes to the primary dealers system and the secondary market for local-currency debt, a senior government official told EnterpriseAM.
The problem: Hot money in the local market hit USD 30.9 bn at the end of November, up from USD 25 bn in June. But some USD 9 bn is held by investors who move into and out of positions quickly, chasing high rates. Those are the kind of flows that can reverse fast when conditions change. Slightly lower, but stable, rates tend to attract higher-quality investors; elevated real yields bring riskier capital, the official said.
What’s in the package: Simplified primary dealer procedures, measures to get more banks into the primary market, new incentives that are still being finalized, and a tech upgrade to link trading, settlement, and clearing systems, we’re told. The Egyptian Exchange is separately working to boost liquidity and pricing efficiency — and bring in new investors — for government bonds and T-bills, EGX chief Islam Azzam said at a conference this week. Average daily trading in the secondary market has already hit EGP 60 bn, according to Azzam.
The goal here is to reward primary dealers who attract long- and medium-term institutional capital as officials try to turn the local debt market into a more-structural asset class rather than a high-yield playground.
New instruments on the way: The Ministry is also planning to launch a retail debt market for the first time next year, we’re told, adding to its recent rollout of sovereign sukuk, zero-coupon bonds, and floating-rate notes.
Background: The Finance Ministry launched Egypt’s first-ever local sovereign sukuk in October. The program’s second issuance in mid-November was 11x oversubscribed, prompting the Ministry to increase its December issuances — the third tranche raised EGP 5.5 billion. The sukuk program targets EGP 200 billion by June 2026.
Why it matters: The reforms are designed to support our bid to rejoin JPMorgan’s local-currency EM bond index, from which we were turfed in 2024 when the FX crisis blocked hot-money investors from getting out of the market. Officials at FinMin are also looking to stretch out the maturity profile of Egypt’s debt stock.
When’s it happening? Look for piecemeal implementation over at least a year, the official told us, alongside the rate cuts most market watchers expect in 2026.
Who’s working on it: The Finance Ministry is working with the Central Bank and the Financial Regulatory Authority on the new framework, which aims to boost liquidity in the debt market while attracting longer-term investors.
