The government plans to borrow EGP 281.75bn to finance the state budget deficit during the third quarter (Q3) of the new fiscal year (FY) 2015/2016, according to a plan prepared by the Ministry of Finance in coordination with the Central Bank of Egypt (CBE) and handed out to a number of banks operating in the local market last week.
The Ministry of Finance’s plan, of which Daily News Egypt obtained a copy, states that the government will issue EGP 208bn worth of treasury bills and bonds worth EGP 73.75bn between the beginning of January and the end of March.
CBE will put up a bills and bonds valued at EGP 87bn twice in January and February. Furthermore, EGP 107.75bn worth of bills and bonds will be offered in March.
According to the plan prepared by the Ministry of Finance, bids for treasury bills are to be launched; treasury bills with a maturity period of 91 days are worth EGP 37bn; bills with a maturity period of 182 days are worth EGP 52bn; bills with a maturity period of 273 days are worth of EGP 58.5bn; bills with a maturity period of 364 days are valued at EGP 58.5bn.
The plan also offers zero-coupon bonds of 18 months worth EGP 12bn, three-year bonds that mature in December 2019 worth EGP 6bn, three-year bonds worth EGP 6bn that will mature in February 2019, and three-year bonds maturing in March 2019 valued at EGP 6bn.
The government will also offer five-year bonds worth EGP 15bn that mature in January 2021 and another set of five-year bonds worth EGP 6bn that mature in November 2020.
The plan also includes seven-year bonds worth EGP 3.5bn that mature in December 2022, in addition to seven-year bonds worth EGP 7bn that mature in February 2023. The government will put forward ten-year bonds maturing in June 2024 worth EGP 5.25bn, as well as another set worth EGP 7bn that mature in November 2025.
The government has been launching treasury bills and bonds to the domestic market via 15 banks, which then sell part of these bills and bonds to their customers from local and foreign individuals and institutions.
Those banks include the National Bank of Egypt, Banque Misr, Banque du Caire, Bank of Alexandria, Commercial International Bank (CIB), Arab African International Bank, Export Development Bank, QNB Alahli, Suez Canal Bank, Misr Iran Development Bank, Crédit Agricole, Citibank, Arab Bank, HSBC Bank, and Barclays Bank.
State, commercial, and private banks and branches of foreign banks operating in the Egyptian market account for 75.5% of the total treasury bills as well as the largest share of bonds. Banks’ investment funds also are among the most prominent investors in treasury bills and bonds.
The government during the first half of the current FY 2015/2016 has issued bids on treasury bills and bonds worth EGP 540bn. In the previous FY 2014/2015 the government issued bills and bonds worth EGP 918.367bn.
The government, as represented by the Ministry of Finance, resorts to launching bills and bonds in the local market to cover the growing deficit in the state budget which amounts to about EGP 251bn in the 2015/2016 budget, according to the latest estimates by the Ministry of Finance. The government also launched bills and bonds to pay due balances to investors, banks, and others in treasury bills and bonds.
According to CBE, the total outstanding balances of treasury bonds and bills put forward by the government over the past years and through the end of September has reached EGP 1.1848tr, of which EGP 630.4bn were in bonds and EGP 554.452bn were in treasury bills.