Egypt to sell euro bonds as confidence grows
EGYPT’S cabinet is expected to approve a plan to sell 1.5 billion in euro-denominated bonds in two to three weeks, the finance minister said, as the government sought cheaper finance abroad to plug its budget gap.
The finance ministry had started initial discussions with some European investment banks, Amr El-Garhy said in Bahrain late on Saturday. The notes, which will be Egypt’s first in euros, will likely have tenors of five to 10 years, he said. The plan was to sell the bonds before the end of November, said El-Garhy.
There were some “pockets of money” in Europe that were interested in Egyptian assets, ElGarhy said. “We’re taking good advantage of the current market conditions as well as the progress in our current economic reform programme.”
With local borrowing costs above 15 percent, Egypt is increasingly looking at international debt markets to capitalise on growing investor confidence after it floated its currency and cut costly energy subsidies. The steps helped seal a three-year $12 billion (R157.57bn) loan programme from the International Monetary Fund in November. Egypt has since raised $7bn from the sale of international bonds, helping foreign reserves surge to a record of more than
In a year full of economic reform actions, you don’t see any positive sign from Moody’s.
$36bn.
“The focus is to make sure that the level of external debt to gross domestic product (GDP) is within a manageable level,” El-Garhy said.
The budget deficit fell to 10.9 percent from 12.5 percent of GDP in the fiscal year ended June 30 on the subsidy cuts and a government tax increase.
Yet Moody’s Investors Service last month stopped short of upgrading Egypt’s junk credit rating – or even improving its outlook from “stable” – citing Egypt’s “very weak government finances” and increased external exposure.
“It was a bit strange, to say the least,” El-Garhy said of the decision. “In a year full of economic reform actions and very bold actions on all fronts, you don’t see… any positive sign” from Moody’s, he said.
Egypt is rated B3 at Moody’s, six steps below investment grade and on par with Lebanon, Argentina, Pakistan and Ghana. – Bloomberg