Egypt signs $3.1 bil­lion fund­ing deal with lenders

The Daily Star (Lebanon) - - BUSINESS -

Egypt signed an ex­panded $3.1 bil­lion fi­nanc­ing deal with for­eign banks as it con­tin­ues to bol­ster for­eign re­serves and pre­pare for about $14 bil­lion of for­eign debt re­pay­ments in 2018.

The re­pur­chase trans­ac­tion, signed in Nov. 2016 for one year, was in­creased from $2 bil­lion and ex­tended for an­other year, the Cen­tral Bank of Egypt said in a state­ment. Gov­er­nor Tarek Amer had said Mon­day the new deal size was $3.2 bil­lion. Egypt re­paid the $2 bil­lion from the old deal on Nov. 9.

“The fund­ing is based on the same col­lat­eral of last year’s deal and was con­cluded at fa­vor­able terms re­flect­ing con­fi­dence in Egypt’s eco­nomic re­forms,” cen­tral bank sub-gov­er­nor Rami Aboul Naga said.

Egypt was able to boost its for­eign cur­rency re­serves to about $37 bil­lion since it floated the pound in Nov. 2016 to end a dol­lar crunch that was crip­pling the econ­omy.

For­eign debt has risen since Egypt floated the pound in Nov. 2016

But the in­crease was cou­pled by heavy ex­ter­nal bor­row­ing, with the coun­try’s for­eign debt ris­ing to $79 bil­lion in June from $55.8 bil­lion a year ear­lier. Egypt’s bank­ing sys­tem has re­ceived a to­tal of $80 bil­lion since float­ing the pound, Amer said.

Un­der the ar­range­ment, Egypt’s Fi­nance Min­istry is­sued $4 bil­lion in bonds on the Ir­ish Stock Ex­change last year, with the cen­tral bank buy­ing them and us­ing most as col­lat­eral for the re­pur­chase agree­ment with lenders in­clud­ing Bar­clays Bank, HSBC and Deutsche Bank.

Egypt re­ceived a to­tal of $4.3 bil­lion in bids for the deal re­newal. It is set to re­pay $14 bil­lion in debt prin­ci­pal and in­ter­est in 2018, ac­cord­ing to the lat­est avail­able cen­tral bank data. Some of Egypt’s debtors, in­clud­ing Saudi Ara­bia and the United Arab Emi­rates, have agreed to ex­tend the re­pay­ment for debt ma­tur­ing next year.

The cen­tral bank has said the in­crease in for­eign debt was fu­eled by “low cost, long term” fund­ing, while Fi­nance Min­istry of­fi­cials have re­peat­edly said ex­ter­nal ex­po­sure re­mains within safe lev­els.

Ex­ter­nal debt made up 34 per­cent of gross do­mes­tic prod­uct in June com­pared with 17 per­cent a year ear­lier, while ser­vic­ing for­eign debt made up 13 per­cent of an­nual cur­rent re­ceipts, up from 10 per­cent. – Bloomberg News

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