Egypt begins to market first Eurobond since 2015

CAIRO: Egypt is pushing ahead with plans to tap overseas bond markets, bolstered by a $12 billion loan from the International Monetary Fund (IMF) — the lender’s largest in the region.

A marketing roadshow for Eurobonds worth as much as $2.5 billion begins in Abu Dhabi and Dubai on Tuesday, and will take in New York, Boston, Los Angeles before wrapping up in London on January 23.

Egypt plans to offer 5-year and 10-year maturities, and may consider a 30-year tranche.

A shortage of hard currency derailed economic growth since Egypt last sold $1.5 billion of 10year international bonds in June 2015 at 5.875 per cent, though a recent borrowing spree from the IMF, the World Bank, Saudi Arabia and others has boosted coffers.

Even with its renewed funding, the central bank won’t lend to the government as liberally as it used to, and will keep reserves as “a cushion for possible economic shocks,” according to Noaman Khalid, an economist at Cairobased CI Asset Management. That’s forced the government to borrow at an unsustainable rate of about 20 per cent in local debt markets, he said.

Egypt may issue as much as $6 billion of international bonds this year, Finance Minister Amr El-Garhy told Bloomberg in November. The current sale was scheduled for November, but was delayed due to market volatility following Donald Trump’s election victory.

Between September and November last year, authorities introduced value-added taxation and raised the price of fuel. The central bank lifted the key interest rate by 300 basis points to 14.75 per cent in November, and floated the pound. The government now plans to phase out fuel subsidies gradually, but officials have not released a schedule for the cuts. The parliament is also discussing a new investment law to facilitate doing business in the country, while the finance ministry is preparing regulations to ease tax dispute reconciliation. -