Egypt cancels T-bond bids after requesting high returns

CAIRO – 10 July 2018: The Egyptian Ministry of Finance canceled bids to sell three- and eight-year bonds worth LE 3.5 billion after banks and investors had asked for high interest rates.

“The prices are not appropriate,” Assistant Minister of Finance for capital markets operations,Khalid Abdel Rahman, told Reuters by phone. "We will accept the prices that suit us," Abdel Rahman added.

According to Reuters, bankers said that banks offers in bids were between 18 and 18.5 percent.

The Central Bank of Egypt (CBE), on behalf of the Ministry of Finance, issued LE 3.5 billion ($195.39 million) in treasury bonds Monday.

The T-bonds were offered in two installments, with the first valued at LE 1.5 billion with an eight-year term and the second worth LE 2 billion with a three-year term.

Egypt targets an average of interest rate on the government debt instrument to reach 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.

The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) kept interest rates unchanged for the second time this year during June meeting, setting the overnight deposit rate and the overnight lending rate at 16.75 percent and 17.75 percent, respectively.

MPC also kept the interest rates unchanged in May after lowering them twice earlier this year by 1 percent each time.

On March 29, the committee set the overnight rate and the overnight lending rate at 16.75 percent and 17.75 percent, respectively. In February, the committee lowered the interest rates by 1 percent for the first time since the flotation of the Egyptian currency in November 2016, after inflation rates slowed down.