Egypt signs $3.1 billion funding deal with lenders
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