The Ministry of Finance announced on Wednesday it will likely reduce the accepted amounts of treasury bills (T-bills) and bonds bids issued in local currency until the end of FY 2019/2020, which ends in June.
The ministry said the move came on the back of receiving the Rapid Finance Instrument (RFI) loan from the International Monetary Fund (IMF), worth $2.7 billion, to address the COVID-19 crisis and its implications.
The ministry stressed that acquiring the IMF loan reflects the international financial institutions' praise of Egypt’s economic and fiscal policies, which resulted in keeping Egypt’s credit rate with a stable outlook by global credit rating institutions.
It added that these signs reflect the financial institutions’ confidence in Egypt’s ability to cope with the external shocks despite the negative impacts of the COVID-19 outbreak.
On Sunday, the Central Bank of Egypt (CBE) announced it is ready to issue EGP 19 billion in T-bills, on behalf of the Finance Ministry, in two installments: the first is estimated at EGP 8.5 billion with a 91-day yield, while the second is valued at EGP 10.5 billion with a 273-day yield.
Foreign investors sold more than half their T-bill holdings in local currency in March, according to the CBE, amid the COVID-19 pandemic which led them to pull money out of emerging markets.
Foreign customers held the equivalent of EGP 149.3 billion ($9.5 billion) as of the end of March, down from EGP 310.65 billion at the end of February, according to the CBE.
Meanwhile, Finance Minister Mohamed Maait said in April that foreign investment in Egyptian T-bills stood at between $13.5 billion and $14 billion, which may include foreign holdings of treasury bonds, which the central bank doesn’t provide figures for.
Egypt’s net foreign reserves dropped by $5.4 billion to $40.1 billion in March, while the net foreign assets of the country’s banks declined by EGP 162.12 billion, according to the CBE data.
In May, the CBE announced that Egypt’s foreign reserves dropped by a further $3.07 billion in April.
On 11 May, the IMF’s Executive Board approved Egypt’s request for emergency financial assistance of $2.772 billion (100 percent of Egypt’s quota) under the RFI to meet the urgent balance of payments needs stemming from the outbreak of the COVID-19 pandemic.
The IMF also announced that purchase under the RFI entails exceptional access due to outstanding credit under the previous extended arrangement under the Extended Fund Facility.
According to the IMF, Egypt achieved a remarkable turnaround prior to the COVID-19 shock, carrying out a successful economic reform programme supported by the IMF’s Extended Fund Facility to correct large external and domestic imbalances.