The government borrowed EGP 1.12175tn through treasury bills and bonds during 2016, according to figures obtained by Daily News Egypt.
These figures show that the government borrowed EGP 278.5bn from January-March 2016, and EGP 291.25bn from April-June 2016.
In addition, the government borrowed EGP 294.5bn from July-September 2016, and borrowed EGP 257.5bn from October-December 2016.
According to the Central Bank of Egypt (CBE), the total outstanding balances of treasury bills and bonds amounted to approximately EGP 1.478tn by the end of August 2016, of which about EGP 795.4bn are treasury bonds, and EGP 682.97bn are treasury bills.
In the same context, the government revealed its intention to borrow EGP 299.019bn to finance the state’s general budget deficit in the first quarter (Q1) of the fiscal year (FY) 2017, according to a plan by the Ministry of Finance in cooperation with the CBE. A number of banks operating in the local market received the plan last week.
The Ministry of Finance’s plan, of which Daily News Egypt received a copy, shows the government is aiming to issue treasury bills worth EGP 289bn, and treasury bonds worth EGP10.019bn between January and March 2017.
The CBE will issue treasury bills and bond auctions on behalf of the government in January worth EGP113.569bn, in February worth EGP 92.15bn, and in March worth EGP 93.3bn.
The government also plans to issue treasury bills worth EGP 76.25bn for 91 days, and bonds worth EGP 75.25bn for 182 days. Bills worth EGP 68.75bn and EGP 68.75bn will also be issued for 273 days and 364 days respectively.
The government will also sell three-year bonds that mature in September 2019 valued at EGP 3.5bn, five-year bonds that mature in August 2021 valued at EGP 2.481bn, seven-year bonds that mature in August 2023 worth EGP 2.25bn, and ten-year bonds that mature in July 2026 valued at EGP 1.788bn.
According to an official at a government bank, the Ministry of Finance’s plan is intended to reduce its long-term bonds in the coming period in order to issue short-term bonds.
The official explained that the ministry has chosen to focus on short-term bonds so as to reduce their share of the high interest rates on long-term bonds. The decision was made after a return on debt instruments increased massively after the flotation of the Egyptian pound and increased interest rates at the CBE on 3 November 2016.
According to the Ministry of Finance, the average interest rate on the latest 91-day treasury bills reached 19.155% last week. 182-day bills reached 19.72%, while 266- and 346-day bills reached 19.924% and 19.829%, respectively.
The average bond yield for three-year bonds reached 16.768%. Five-year bonds reached 16.718%, while seven- and ten-year bonds reached 17.196% and 17.112%, respectively.
The government suffers from a chronic deficit in the state budget. The state budget deficit of FY 2016/2017 is expected to reach EGP 319.46bn, according to an earlier statement issued by the Ministry of Finance.
According to the principal trading system designated between the government and banks since 2004 the government has been launching treasury bills and bonds to the domestic market via 15 banks, which then sell a portion of these bills and bonds to their foreign and local individual customers and institutions.
Those banks include the National Bank of Egypt (NBE), Banque Misr, Banque du Caire, Commercial International Bank (CIB), Citibank, HSBC, Misr Iran Development Bank, QNB Al-Ahli, Crédit Agricole, Moroccan Attijariwafa Bank (formerly Barclays Bank), Alex Bank-Intesa San Paolo, Arab African International Bank, Export Development Bank, Suez Canal Bank, and Arab Bank.