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EGP 10.5bn to support budget deficit by Egyptian banks - Daily News Egypt

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EGP 10.5bn to support budget deficit by Egyptian banks

NBE-led union collects loan worth $1.5bn to pay portion of the dues of foreign oil companies operating in Egypt

EGP 10.5bn to support budget deficit by Egyptian banks (Photo from Al-Borsa News)
EGP 10.5bn to support budget deficit by Egyptian banks
(Photo from Al-Borsa News)

The Ministry of Finance has asked local banks to manage funds worth EGP 10.5bn from which the ministry can borrow to finance the budget deficit on Sunday and Monday.

The Central Bank of Egypt (CBE) said Saturday it will supply treasury bills in two parts totalling EGP 6bn on Sunday. The first one will be worth EGP 2.5bn over a period of 91 days, the second worth EGP 3.5bn over a period of 373 days.

On Monday, the CBE will present treasury bonds worth of EGP 1.5bn over a period of year and half, and another bond amounted EGP 2bn over a period of three years, and a bond amounted EGP 1bn over a period of seven years.

The ministry had received funds worth $1.8bn, from dollar treasury bills over a period of one year, which were sold to local banks and foreign financial institutions.

The budget deficit for the fiscal year (FY) 2015/2014 is worth approximately EGP 240bn. The deficit will be financed by the CBE through treasury bills and government debt bonds on behalf of the finance ministry. This comes in addition to aids and grants from Arab countries and international loans.

The ministry said it will put forward treasury bills and bonds totalling EGP 214.5bn, the equivalent of $29.8bn during Q2 of the current FY. This is compared to EGP 206.5bn, the equivalent of $28.7bn in Q2 of the FY 2013-2014, an increase of 3.8%.

The ministry said on its website Thursday that there will treasury bills over the period of 182 days with average return by 11.86%, as well as treasury bills over 364 day with average return by 12.06%.

An National Bank of Egypt (NBE) led union, which includes the National Bank of Abu Dhabi (NBAD) and HSBC, collected a loan worth $1.5bn to pay part of the dues Egypt owes foreign oil companies operating in the country.

In a joint statement issued by the union on Friday, they will arrange a joint loan for the Egyptian General Petroleum Corporation (EGPC), and the payment will be on three-year quarterly instalments.

The union won the deal after strong competition with five other alliances or unions participated in EGPC tender to choose the union, which can secure the required funding.

The statement said the Commercial International Bank (CIB), the Arab African International Bank (AAIB) and Arab Bank were joining together as part of the arrangement as secondary finance guarantors and mandated arrangers of the union.

NBE head Hisham Okasha told Reuters that the disbursement of the loan will start before the end of December 2014, with each bank getting a $500m share.

Okasha added that Egypt is experiencing the worst energy crisis in decades. He attributes this to the steady decline in gas production and fear of foreign companies increasing their investments in the country because they did not receive their dues.

The government has begun to address the problem of energy sector payments. The Ministry of Petroleum declared this month that it hopes to repay $4.9bn owed to oil and gas foreign companies within six months.

The CBE declared in a statement at the beginning of this month, that the reserve balances of foreign exchange raised to $ 16.909bn by the end of October. This compares to $16.871bn by the end of September with an increase of $ 38m.

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