Figures obtained by Daily News Egypt indicated the government’s intention to expand the process of borrowing from the domestic market to significantly fill the chronic deficit in the state budget during the first quarter of fiscal year (FY) 2018/2019.
According to those figures, the Ministry of Finance intends to offer bids for treasury bills (T-bills) and treasury bonds (T-bonds) worth EGP 498.75bn between July and September of this year, making it the largest borrowing rate through debt instruments in Egyptian history.
The plan by the Ministry of Finance—obtained by DNE—reveals that the government aims to rely more on treasury bills to borrow from the local market and avoid, as much as possible, the issue of treasury bonds, so as not to have to pay a large return for many years. The Ministry of Finance aims to float T-bills worth EGP 481bn and T-bonds worth EGP 17.75bn.
The Finance Ministry has been forced to cancel several issues of T-bonds in the past two weeks, after investors sought higher returns that were disproportionate to the country’s economic situation.
The Central Bank of Egypt (CBE), which is carrying out the task on behalf of the government, is offering bids for T-bonds and bills worth EGP 192bn in October, another tranche of EGP 153.5bn in November, as well as EGP 153.25bn in December.
The CBE will float 91-day T-bills worth EGP 125.25bn, 182-day bills worth EGP 123.5bn, 273-day worth EGP 110.75bn, and 364-day bills worth EGP 121.5bn, according to the plan.
The government’s plan also includes the issuance of three-year bonds due in August 2021, worth EGP 4.25bn, another set of three-year bonds due in December 2021, worth EGP 1.5bn, and five-year bonds due in October 2023, worth EGP 4.75bn.
Moreover, the government will offer seven-year bonds due in August 2025, worth EGP 4bn, 10-year bonds due in May 2026, worth EGP 1bn, and 10-year bonds due in November 2028, worth EGP 2.25bn.
The government had borrowed about EGP 1.61tn through debt instruments throughout FY 2017/2018. It has also borrowed EGP 475.5bn in Q1 this year.
Bonds and bills are issued through 15 banks participating in the primary dealers system in the primary market, according to an agreement between the government and banks since 2014. Also, these banks sell a portion of these bonds and bills in the secondary market to individual investors, as well as to local and foreign institutions.