Egypt's central bank to offer EGP 20.5 bln T-bills to plug state's budget deficit

Doaa A.Moneim , Sunday 23 Aug 2020

The state’s budget deficit was widened under the pressure of the COVID-19 crisis to 6.5 percent of GDP in FY2019/2020 up from 6.2 percent in FY2018/2019

The Egyptian Central Bank offices in Cairo, Egypt (Photo: Reuters)

The Central Bank of Egypt (CBE) is set to offer treasury bills (T-bills) in Egyptian pounds, on behalf of the finance ministry, on Sunday worth EGP 20.5 billion over two terms to provide finances to fill the state’s budget deficit.

The first offer is 182-day term T-bills worth EGP 9.5 billion, while the second offer is 375-day term T-bills worth EGP 11 billion, according to the CBE.

The maturity date of the first offer will be on 23 February 2021, while the maturity date for the second offer will be on 17 August 2021.

Offering T-bills in auctions is an instrument Egypt’s government counts on to deal with the state’s budget deficit, which was widened under the pressure of the COVID-19 crisis to 6.5 percent of GDP in FY2019/2020, which ended in June, up from 6.2 percent in FY2018/2019.

Egypt’s FY2019/2020 budget deficit recorded EGP 389.1 billion, around $24 billion by the end of May, according to the Ministry of Finance.

On 16 August, the CBE offered two types of T-bills: 273-day term T-bills, targeting EGP 10 billion, which matured on 18 May 2021, and 91-day term T-bills, targeting EGP 8 billion, which matured on 17 November 2020.

Minimum and maximum yields on the two T-bill types ranged between 13 percent and 13.8 percent, according to the CBE.

The two types managed to attract 437 bids, 311 bids were accepted that attracted sums close to EGP 32 billion, according to the CBE.

In May, Moody’s expected Egypt’s total budget deficit-to-GDP ratio to reach 7.9 percent in FY2019/2020 and to increase to 8.5 percent in FY2020/2021, with the ability of attaining initial surpluses in lower numbers than the targeted rates that were expected before.

Moody’s also projected that Egypt will witness a setback in its domestic growth rates in the short run to under 3 percent in FY2020/2021, with pressures placed on public finance, debt, and payments balance performance.

Moody’s has kept Egypt’s credit rating at B2 with a stable outlook recently, which is the same rating announced in April.