INTERVIEW- Egypt’s securitization of FX revenu: Risks and prospects

Muhammed Khalid , Thursday 11 Jan 2024

Egypt’s securitization of FX revenue will not affect assets, says Sherif Samy, former chair of Financial Regulatory Authority

Sherif Samy, former FRA chairman.
Sherif Samy, former chairman of the FRA (Photo Credit: Arabianeye-Reuters)


Egypt is studying securitizing up to 25 percent of its USD revenue and offering securitized bonds to investment banks and international investors. The move is meant to raise between $1.4 billion and $10.1 billion annually, or $300 billion through 2030.

This ambitious six-year plan was part of a government document released in January. 

Sherif Samy, former chairman of the Financial Regulatory Authority (FRA), walked Ahram Online through the process of securitization and Egypt's prospected gains from this step.

Ahram Online: What is securitization?

Sherif Samy: Securitization is a financial engineering process where future financial receivables of an entity, be it a company, bank, or public authority, are transformed into immediate liquidity. This is achieved by transferring these rights and issuing securitization bonds in exchange for them. These future rights often encompass premiums from real estate sales, durable goods, or various services. These rights, in the case of state revenue, can be determined at certain percentages and terms, so they wouldn't affect other revenue or assets.

AO: What is the type of revenue the government can securitize?

SS: The government can securitize the revenue of different authorities like the Suez Canal, the Egyptian General Petroleum Corporation, and ports. These revenues are not included in the state treasury like taxes. The government only targets USD streams to avoid the burden of exchange rate differences.

AO: What are the risks for investors in the planned securitized bonds?

SS: It could be minimal, as the government could determine the rights in a given authority’s USD revenue at a percentage that is higher than the value of the issued bonds to avoid risks that may be caused by a future decline in these revenues.

AO: Can securitizing the state’s USD revenue affect Egypt’s assets?

SS: The securitization process will set aside just a portion of the revenue of these assets and any impact will be limited to that portion, and therefore will neither impact the remainder of the revenue nor affect the assets themselves.

AO: What would be the interest on these securitized bonds?

SS: Interest rates are determined based on the overall credit rating of the country and can improve with an upgrade in Egypt’s sovereign credit ratings. High risks for investors mean offering high yields on bonds to make them more desirable.

AO: What are the other risks involved?

SS: The main issue here is that the whole process is somehow forced by the current economic situation. The government is in great need of foreign currency resources to secure necessities. That is understandable. However, that would be an immediate solution that would result in the decline in important USD streams, while the returns of securitization will be mostly dedicated to spending on the procurement of basic commodities rather than investments in lucrative projects.



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