By Islam Serour
The Ministry of Finance announced Saturday an issue of treasury bills and bonds with a total value of EGP 135.228 billion, which was auctioned by the Central Bank of Egypt (CBE) between April and June, in the final quarter of the 2011-2012 financial year.
According to the statement by the Ministry, the government sold 91 day, 182 day, 273 day and 364 day treasury bills, amounting to EGP ten billion, EGP 24.5 billion, EGP 36 billion and EGP 43.728 billion respectively.
Three year bonds (maturing in April 2015) amounted to EGP eight billion, five year bonds (maturing in April 2017) amounted to EGP 5.5 billion, seven year bonds (maturing in April 2019) amounted to EGP 4.5 billion and ten-year bonds amounted to EGP three billion.
Reuters reported on 21 August that the Egyptian government would offer EGP two billion in three-year bonds at auction to be held on Monday 27 August.
Domestic borrowing in Egypt is relatively high compared to external borrowing, according to Prime Minister Hesham Qandil. During the press conference with IMF Managing Director Christine Lagarde, Qandil said the cost of domestic borrowing reached 16.5 percent of the value borrowed, while the cost of the IMF loan that the government has been negotiating is 1.1 percent.
The Government has been trying to economise and rationalise spending in order to stabilise the country’s deteriorating fiscal situation. Government officials and ministers have reiterated that rationalising subsidies and cutting public spending is indispensable in the short term.
Ashraf el-Arabi, Minister of Planning and International Co-operation, told state-owned Al-Ahram newspaper that the bulk of the budget deficit will be managed through investment in the public sector financed by the IMF loan, while the rest is to be financed by issuing bonds and treasury bills.
Financial expert, Magdy Toulba, stated that “under the current financial and economic hardship, the Egyptian government would be required to diversify sources of borrowing.” Toulba explained that domestic borrowing is less risky with regard to currency foreign exchange, however, external borrowing such as the IMF loan is less costly as the borrowing cost is 1.1 percent of the value borrowed.
“Domestic borrowing is more socially acceptable, and it has its positive impact on cash flow in the national currency, but we have to keep in mind the fact that the total domestic debt has reached a trillion pounds,” said Toulba.