Figures obtained by Daily News Egypt revealed the government’s intention to broaden the borrowing process from the local market in order to bridge the chronic deficit in the state budget significantly during the first quarter of 2019 (1Q20), that is, 3Q of the fiscal year (FY) 2019/2020.
It is expected that the value of the public budget deficit by the end of the fiscal year 2019/2020 will reach about EGP 445.1bn.
According to the government’s plan, the Ministry of Finance intends to launch bids for treasury bills and bonds worth EGP 547bn from 1 January to 31 March 2020, which is the largest borrowing rate for the government through debt instruments since the launch of these tools on the market at all.
The Ministry of Finance revealed that the government plans to issue 52 treasury bill auctions, at a value of EGP 457bn and to issue 26 treasury bond bids, at a value of EGP 90bn.
The Central Bank of Egypt (CBE), which handles this task on behalf of the government, will launch in January auctions for bonds and bills worth EGP 166.5bn, EGP 168bn in February, and EGP 212.5bn in March.
According to the plan, 91-day treasury bills worth EGP 52bn will be offered, as well as 182-day bills worth EGP 130bn, 273 days bills worth EGP 136.5bn, and 364 days bills worth EGP 136.5bn.
The government’s plan also includes offering 3-year bonds due in June 2023, at a value of EGP 7.25bn and 3-year bonds due in February 2023, worth EGP 19.5bn.
The Finance Ministry also offers 5-year bonds due in January 2025, at a value of EGP 19.5bn, 7-year bonds due in June 2027 worth EGP 22.75bn, 10-year bonds due in January 2030 worth EGP 19.5bn. According to the Ministry of Finance, the outstanding balances of T-Bonds and T-Bills owed by the government registered at EGP 2.028tn at the end of August 2019, including about EGP 1.213tn of treasury bills, and EGP 814.973bn of bonds.
Banks working in the Egyptian market are considered the largest investors in bonds and treasury bills, which the government issues on a regular basis to cover the state’s budget deficit.
Treasury bonds and bills are offered through 15 banks, which are the primary dealers in the primary market. These banks resell a portion of these bills and bonds in the secondary market to retail investors, as well as to local and foreign institutions.
Mohamed Moeit, Minister of Finance, said that the government plans to bridge the state deficit to under 7% of GDP in fiscal year 2019/2020 and curb public debt from 108% of GDP in 2017/2018 to 92% in 2019/2020.
According to figures of the CBE, public local debt reached EGP 4.288trn at the end of June 2019 against EGP 4.205trn at the end of March.
The CBE noted that 87% of debt worth EGP 3.73trn is owed by the government, while 6.6% worth EGP 282.9bn is owed by economic agencies, and 6.4% worth 275.2bn is owed by the National Investment Bank.