After almost three years of discussions, JP Morgan said in October that Egypt was set to join EMBI by the end of January 2022, asserting that the country is eligible to join the index with an estimated weight of 1.8 percent with 14 government bonds with a total value of $24 billion.
The company also said that 90 percent of the investors it surveyed supported the inclusion.
In addition to Egypt, South Africa will also join the index.
Egypt will also join the JP Morgan’s Environment and Governance Index by end of January 2022 with 1.1 percent of the index, based on Egypt’s issuance of its green bonds in October 2020, according to the minister.
Maait noted that Egypt will join this index with 14 government bonds valued at $26 billion, adding that the action will allow large investment funds and foreign investors to invest in Egypt’s debt instruments in local currency.
“$1 billion in new investments are expected to be pumped in the Egyptian governmental equity market as a result of the action,” Maait pointed out.
Egypt was removed from the EMBI in June 2011 on the back of economic and political instability amid the 25th January Revolution, which eroded the country’s ability to meet its requirements.
Such a development comes in line with the Egyptian government’s efforts to reduce the cost of public debt as part of the country's economic reforms, according Maait.
Deputy Finance Minister for Financial Policies Ahmed Kojok said that the action comes as a result of the ministry’s strategy to raise the efficiency of public debt management with a medium-term plan to decrease debt and its service costs.
Egypt’s total external debt to be repaid in 2022 – including medium and long-term debt – is valued at $17.9 billion. Of this, $11.9 billion will be repaid in the first half of the year, according to the Central Bank of Egypt (CBE).
CBE’s data also showed that Egypt’s external debt size is in a safe zone, at 34.2 percent of the country’s GDP by end of June.
In October, the International Monetary Fund (IMF) projected Egypt’s government gross debt to hit 91.4 percent of its GDP in 2021, up from the 89.8 percent recorded in 2020.
In its Fiscal Monitor Report, the IMF expected this ratio to decline in 2022 to 89.5 percent, declining to 78.2 percent in 2025, and 74.1 percent in 2026.
Moreover, the report predicted Egypt’s general government net debt to jump to 83.5 percent of GDP in 2021, up from the 79.2 percent in 2020.
The government’s net debt to GDP ratio is expected to begin declining in 2022 to reach 82.2 percent, then 78.8 percent in 2025, and 68.2 percent in 2026, according to the report.