Egypt Plans Eurobond Sale to Ease Pressure on Reserves

CAIRO, Egypt, Capital Market in Africa — Egypt plans to tap international bond markets in the second quarter this year, Prime Minister Sherif Ismail said, in order to preserve foreign reserves amid a slowing global economy.

Egypt has approved a bond-issuance program of up to US$10 billion, and in June 2015, it raised US$1.5 billion of Eurobonds as part of the program. The government plans to issue another US$1.5 billion in the fourth quarter of 2015 but was delayed due to rising borrowing costs amid of negative outlook in China. Egypt is trying to plug a currency gap caused by a plunge in tourism revenue, foreign direct investment and exports, as well as less aid from oil-rich Persian Gulf allies.

“We will decide and go to the market in the second quarter,” Ismail told reporters in Dubai on Tuesday, adding that the size of the sale hasn’t been decided. The government has said it may raise as much as US$1.5 billion.

In addition, the government also plans to settle aboutUS$3 billion of debt owed to foreign oil companies or “at least reach a reasonable overdue” by the end of this year, Ismail said. It also hopes that parliament will approve a value-added tax by the second quarter, he said.

Egypt government international bonds amount outstanding is recorded at US$4 billion , of which US$1 billion and US$ 17.5 million are due in principal and interest payments respectively (see table below for break down). The yield on the nation’s 5.875-percent Eurobonds due in 2025 is trading at 8.293 percent at as at Tuesday 8th February 2016 relative to 7.849 percent at the end of 2015.

Egypt’s international reserves rise from $16.445 billion in December to US$16.478 billion in January 2016, according to Central Bank of Egypt data. Although, the reserves have stabilized in the last 5 months at more than US$16 billion, having fall from US$18.1 billion to US$16.335 billion in September 2015 (this is relative low compared to reserve of US$36 billion before the 2011 Arab uprising in Egypt). See table below for more info.