Egypt Eyes Panda, Samurai, Sukuk Issuances for Next Fiscal Year

CAIRO (Capital Markets in Africa) – Egypt is gearing up to issue its first Panda, Samurai, sukuk and green bonds in the fiscal year starting in July as it attempts to cut borrowing costs by diversifying funding sources, Finance Minister Mohamed Maait said.

The country raised $6.2 billion from dollar and euro bond markets in early 2019, but postponed plans to issue debt denominated in Japanese yen and Chinese yuan, sukuk and green bonds during the current fiscal year ending June 30 because it needs more time to prepare, Maait said in an interview in Washington.

“We will make sure that next year we will be more ready to issue Panda, Samurai and Green bonds,” Maait said. “We are not going to issue any new debt” in the international market in the current fiscal year, he added. No decisions have been made regarding the size of the offerings or their timing, he said.

Diversification of instruments and a gradual shift from short-term debt toward longer-dated credit are pillars of a four-year debt strategy designed to reduce the burden for one of the Middle East’s most indebted countries.

Egypt already raised $2.2 billion from euro-denominated bonds last week, after raising $4 billion from the dollar debt market in February.

It’s targeting lower yields on domestic bonds and treasury bills in the new fiscal year — an average 15.5 percent versus 18 percent currently — confident that its securities will remain coveted.

Maait said he isn’t worried that lower yields will affect demand for debt. Improving Egypt’s fiscal and monetary position “will give more confidence to our investors to invest and reduce the level of risk, which means that they can accept lower yields,” he said.

New IMF Engagement
Maait said his country is in talks with the International Monetary Fund on a non-financial program designed to reassure investors after it finishes disbursing a $12 billion loan in June. 
IMF Managing Director Christine Lagarde and Egyptian President Abdel-Fattah El-Sisi agreed at an April 9 meeting that their teams would discuss “new engagement between Egypt and the IMF,” he said, without elaborating.

Maait also said:

• Egypt is equipped to hedge against oil prices whenever necessary, but not for wheat
• He expects local debt to conform with the requirements of the Euroclear clearing house in the coming fiscal year
• The ministry is working to meet the requirements for joining JP Morgan emerging-market bond indexes
• Ties with Turkey, strained by the overthrow of Egypt’s Mohammed Mursi was overthrown by El-Sisi in 2013, are “moving” on trade and economy fronts. “I don’t believe there’s a problem from an economic point of view between investors” he said.