CBE issues LE 1.7B in T-bonds Monday

CAIRO – 22 April 2018: The Central Bank of Egypt (CBE), on behalf of the Ministry of Finance, issued LE 1.75 billion in treasury bonds on Monday, April 22.

The T-bonds were offered in two installments, with the first valued at LE 750 million with a 10-year term and the second worth LE 1 billion with a five-year term.

The Ministry of Finance will auction treasury bills and bonds at a total value of LE 478.5 billion during the fourth quarter of fiscal year 2018/2019.

The ministry said it will auction three-year treasury bonds (maturing in January 2023) worth 4.75 billion, three-year bonds (maturing in June 2022)worth LE 2 billion, five-year bonds (maturing in April 2024) for LE 5.75 billion, and seven-year bonds (maturing in April 2026) at LE 5 billion. It will also auction 10-year t-bonds (maturing in November 2027) at a total value of LE 1.5 billion, and 10-year t-bonds (maturing in May 2029) at LE 2.75 billion.

It also clarified that during April, it will auction three-year treasury bonds (maturing in January 2023) worth 2.75 billion, five-year bonds (maturing in April 2024) worth LE 2 billion, seven-year bonds (maturing in April 2026) for LE 2 billion, and ten -year bonds (maturing in November 2027) at LE 1.5 billion.

The Monetary Policy Committee of the Central Bank of Egypt (CBE) kept the overnight deposit rate and the overnight lending rate at 15.75 percent and 16.75 percent, respectively, during March meeting.

Egypt has lately conducted modifications on the bonds market started by modifying the treasury bills and bonds treatments, and followed by allowing companies to offer short-term bonds.

During December, The Financial Regulatory Authority (FRA) issued a decree allowing companies to offer and issue short-term bonds.

According to the decree, these companies included joint stock companies and shareholding companies, as well as companies authorized to engage in a non-bank financial activity after getting the authority's approval, with banks subject to the Central Bank's approval.

Meanwhile, Egypt conducted financial treatments of treasury bills and bonds' taxes.

Minister of Finance Mohamed Ma'it revealed that the reason behind the financial treatments of T-bills’ taxes is that it is one of the rights of the treasury.

In 2018, Egypt canceled bids for treasury bills four times, each worth LE 3.5 billion, amid calls to raise its interest rates.

The Central Bank of Egypt’s Monetary Policy Committee kept interest rates unchanged for the fifth time this year during November meeting, setting the overnight deposit rate and the overnight lending rate at 16.75 percent and 17.75 percent, respectively.

For the current fiscal year, the budget deficit is estimated to record LE 438.59 billion, or 8.4 percent, planned by the ministry to be financed through treasury bills and bonds and through international and Arab loans.

Egypt targets an average interest rate on the government debt instrument of 14.7 percent in the current budget, compared to an expected average of 18.5 percent in 2017/2018 budget.

Foreign investors’ investments in the Egyptian government debt instruments recorded $23.1 billion by the end of March 2018, up from about $20 billion in December.

Egypt needs to fund 2018/2019 budget by LE 714.64 billion; LE 511.21 billion will be provided from domestic debt instrument and the rest will come from foreign financing through the issuance of bonds and the IMF loan.

In November 2016, the Executive Board of the IMF approved a $12 billion loan as a financial assistance for Egypt to support the Egyptian economic reform program.

Upon the board's approval in November, Egypt floated its currency, losing around 50 percent of its value as part of the economic reform program which imposed taxes, including the value-added tax (VAT), and cut energy subsidies, all with the aim of trimming the budget deficit.