Egypt will tap the bond market, once again

Pressured by weak inflows of US dollars due to weak inflows from Suez Canal, tourism, and Egyptian expats' transfer. Egypt will soon issue new Eurobonds with a maximum of USD10 billion.
By Markets Chimp

1/17/17 6:54 PM

Egypt has long been running a budget deficit and more recently post the January 2011 Revolution it has run a growing current account deficit. This has long been the results of a widening trade deficit where imports were double exports. Also, weaker Suez Canal revenues in view of low oil prices and lower tourism revenues due to security issues all contributed to the widening current account deficit. Meanwhile, expats' transfers did not help much. With the lack of adequate foreign direct investments, Egypt has been resorting lately to borrowing from local banks. But this is all in EGP.

Since the deficit is mainly in USD, Egypt is eyeing a global medium-term notes (GMTN) issue for as much as USD10 billion to save the day. Yields are probably going to be around 7%, the same level Egypt yields revolve around today, which is higher than Pakistan but lower than Ghana. Proceeds from this Eurobond issue will help fund the budget deficit and will also help repay some of Egypt's outstanding foreign debt. This is expected to help shore up Egypt's reserves in the short term which may help ease the pressure on the Egyptian pound.


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