The Central Bank of Egypt (CBE) raised $2 billion through its first dollar-bond issuance in nearly two years on January 29, signaling a rebound in the international bond market amid ongoing economic challenges.
New bonds sale
The deal included $1.25 billion in five-year bonds with an 8.625% yield and $750 million in eight-year bonds with a 9.45% return. This move comes as part of Egypt’s broader strategy to manage its external debt and bolster foreign investment.
The government hired JPMorgan Chase & Co., Citigroup Inc., HSBC Holdings Plc, Goldman Sachs Group Inc., Standard Chartered Plc and Sumitomo Mitsui Banking Corp. to manage the latest transaction.
Investors had placed almost $10 billion of orders by the time the final terms were set, a person familiar with the matter told Bloomberg.
To address the ongoing financing challenges, Heba Monir, economist and financial analyst at HC Securities & Investment, stated, “As long as there is a trade deficit, we will always face a financing gap.”
She explained that bridging the gap could be achieved by issuing bonds or attracting Foreign Direct Investments (FDIs). Monir noted that the investment environment improved following the Ras El Hekma investment deal, enabling Egypt to tap the Eurobond market again. The Ras El Hekma deal is unique in its structure, with the expectation that FDIs will stabilize, while continuing to be supported by Ras El Hekma’s annual investments over the next 10-15 years.
She further clarified that issuing bonds before the March 2024 monetary and currency reforms was arduous due to the foreign currency shortage crisis triggered by the Russian-Ukrainian war in February 2022, which negatively impacted Egypt’s credit rating and investor confidence.
Egypt last sold dollar bonds in 2023, raising $1.5 billion from its first Islamic Sukuk issuance. The last time the country issued conventional bonds was in September 2021, when it sold $3 billion.
In March of last year, the Middle East’s most populous country implemented its largest-ever interest rate hike and allowed its currency to depreciate by around 40% against the dollar. This was aimed at addressing a long-standing foreign currency shortage and securing international funding after months of uncertainty. The move led to funding commitments from the UAE, the International Monetary Fund, and other sources, resulting in a global bailout worth approximately $57 billion.
T-bills sale
The CBE said on February 2 that it plans to issue $1 billion in one-year dollar-denominated treasury bills, with settlement due the next day, amid efforts to secure foreign currency liquidity for external financial obligations. The move comes as $1.061 billion in dollar-denominated treasury bills mature next week, prompting the government to roll over its debt to renew financing.
In November 2024, the CBE issued treasury bills worth $1.5743 billion, with a weighted average yield of 4.498% for a one-year maturity. Then, in December 2024, the CBE sold additional USD-denominated treasury bills totaling $840 million, offering a yield of 4.25% and maturing in December 2025.
These bond and T-bill issuances are part of Egypt’s broader strategy to address both short- and long-term financing needs while maintaining investor confidence amid challenging economic conditions.
On December 26, 2024, the Central Bank of Egypt’s Monetary Policy Committee (MPC) decided to keep key interest rates unchanged. The overnight deposit rate remains at 27.25%, the overnight lending rate at 28.25%, and the main operation rate at 27.75%.
Big numbers
In October 2024, Egypt’s Finance Minister announced plans to issue Sukuk and green bonds totaling EGP 10 billion in the local market before the end of FY 2024/2025. This move is part of the country’s broader strategy to diversify its funding sources and promote sustainable investments.
Earlier this month, Goldman Sachs predicted that Egypt would issue between $3 billion and $4 billion in debt during the first half of this year.
Credit ratings
Egypt’s credit ratings are Caa1 (Positive) from Moody’s, B- (Positive) from S&P, and B (Stable) from Fitch. The newly issued bonds are anticipated to be rated B- by S&P and B by Fitch.