The international bonds raised Egypt’s balances to $11.5bn at the end of January 2017, according to a recent report by the Ministry of Finance.
The report, exclusively published by Daily News Egypt, explained that maturities of those bonds range from 1 to 30 years, and they are due for repayment in the period between 1 June 2017 and 31 January 2047, with an average return of 6.416%.
The Ministry of Finance has succeeded at the end of January 2017 to promote three bond issues which attracted $4bn.
According to the Ministry of Finance, the first tranche of the bonds was issued at a value of $1.750bn, with a yield of 6.125%, maturing on 31 January 2022; the second tranche was worth $1bn at a yield of 7.5%, maturing on 31 January 2027; and the third tranche was worth $1.25bn, with a yield of 8.5% and maturing on 31 January 2047.
On 10 November 2016, the ministry introduced three versions of bonds worth $4bn in particular in the London Stock Exchange.
The first tranche was worth $1.36bn, with a yield of 4.62%, maturing on 10 December 2017; the second tranche was worth $1.32bn, with a yield of 6.75%, maturing on 10 November 2024; and the third tranche was worth $1.32bn, at a yield of 7% and maturing on 10 November 2028.
Besides those bonds, there are four other versions of bonds in the international markets, which include an issue at a value of $1bn offered in April 2010 at a yield of 5.75% and maturing on 29 April 2020, and another issue at a value of $500m was offered on 29 April 2010 at a yield of 6.875% and matures on 29 April 2040.
The Ministry of Finance offered bonds at a value of $500m on 1 June 2012 at a yield of 5% that mature on 1 June 2017, and another issue at a value of $1.5bn was raised on 1 June 2015 at a yield of 5.875% and matures on 11 June 2025.
The Egyptian government stopped issuing international bonds in June 2012, but decided in January 2015 to return to this matter again.
Minister of Finance Amr El-Garhy said that the ministry is considering offering bonds in other currencies, such as the Japanese yen and the Chinese yuan, without specifying a specific value in the current time. He added that he is currently studying the situation of the international market, interest rates, and funding needs to Egypt during the coming period.
El-Garhy said in press statements that they bridged the financing gap that was dogging Egypt during the current fiscal year, besides a large part of the gap in the next fiscal year, through recent loans from the International Monetary Fund (IMF), the World Bank, the African Development Bank, and international bonds issued by Egypt. He emphasised that the size of the financing gap during the three years is estimated at $34bn.
According to Tamer Youssef, head of the treasury sector at one of the foreign banks operating in the domestic market, the return of Egypt to the market and its success in the initial public offering (IPO) of those bonds represents a return of confidence in the Egyptian economy and its ability to provide liquidity in foreign currency needed to bridge the funding gap faced by it.
He added that bond maturities and their yield are suitable according to domestic and global markets data.
“We must emphasise on the importance of the state’s efforts in attracting foreign direct investments, through preparing the business environment, the economy, the legal and legislative environment, and the fight against corruption and bureaucracy. The state must develop plans and policies to replace imports, develop export-oriented sectors, and promote the tourism sector, in order to provide sustainable resources of foreign currency to pay off all its international obligations,” Youssef said.
Youssef expected the recent IPO bonds issued by the Ministry of Finance in international markets, at a value of $4bn, to succeed. He noted that obtaining the IMF loan has a positive impact on Egypt’s credit rating, thus attracting direct foreign investment.