Egypt’s Minister of Finance Mohamed Maait has revealed that JPMorgan Chase has added the country to the watch list on its government bond index for emerging markets.
A statement by the Ministry of Finance noted that the move comes in preparation for Egypt’s joining the index within a maximum period of six months. It is expected that it will enter with 14 issues with a total value of about $24bn, with their percentage in the index expected at 1.78%.
Egypt’s addition places both it and South Africa as the only two countries in the Middle East and Africa (MEA) region in this index.
Maait said that Egypt is making steady steps towards economic reform, in a manner that contributes to enhancing the confidence of international financial institutions and the foreign investment community in the Egyptian financial market. It is also set to attract more foreign investors to Egyptian debt instruments in the local currency.
The minister explained that Egypt was formerly part of the index, but left it in June 2011 for not meeting the requirements of JPMorgan Chase.
He also said that, about 18 months ago, the Ministry of Finance began to work towards re-joining through achieving the bank’s requirements. This includes: extending the life of the government debt; adjusting the Yield curve; and raising the percentage of foreign investors’ participation in government financial instruments, with an increase in the size of each issue.
Maait noted that this step reflects his ministry’s continuous efforts to reduce the cost of public debt as part of the package of measures taken by the state for economic reforms. It also comes as part of implementing the strategy to reduce public debt in the medium term, especially in terms of additional proposals to accelerate the path of reducing the debt of the budget apparatus.
This intends to activate the stock market to provide liquidity and enhance demand for government debt instruments and thus reduce their cost.
Maait added that with Egypt’s transition from the watch list to the actual index, about $4.4bn will be pumped as additional new investments into the government’s securities market. This will come in the form of Treasury bills (T-bills) and bonds (T-bonds), thus achieving a debt management strategy to reduce the cost.
Ahmed Kouchouk, Deputy Minister for Financial Policies and Institutional Development, confirmed that Egypt’s joining the watch list is a pre-emptive step to fully joining the index.
It reflects the Ministry of Finance’s continuous efforts to raise the efficiency of public debt management and reduce the cost of its service.
Nevine Mansour, an advisor to the Deputy Minister of Finance and director of this project, said that over the past two and a half years, there has been constant contact with the bank’s team.
This has aimed at providing it with the latest data and developments on the government securities market, and work to meet the requirements of joining the index. This is in addition to modifying the procedures followed regarding non-double taxation and its application to foreign investors.
Mansour indicated that Egypt has joined the watch list of the JPMorgan Chase Index on Environment and Governance, based on the green bond offering in October 2020. Egypt’s percentage in this index will be 1.14%, reflecting the country’s presence on the map of sustainable economies, and the country’s orientation towards green debt instruments.