Foreign investments in treasury bills (T-bills) floated by the Egyptian government declined by EGP 30bn in July 2018, recording EGP 269.115bn down from EGP 299.065bn in June, according to the Central Bank of Egypt (CBE).
The decline in investments started in March this year, in line with the crises faced by several countries by the impact on emerging economies, along with the Federal Reserve System raising its interest rates.
Hany Aboul Fotouh, a banking expert, said that foreign investments in Egyptian T-bills have been declining since March until July 2018, recording a drop of $6.5bn down to $15.01bn.
He pointed out that there are international and domestic reasons for this decline, including the CBE’s decision to cut interest rates in February and March, which led to the return on government debt instruments to fall, thus making them less attractive.
The Ministry of Finance recently cancelled the tender for three and seven-year treasury bonds worth EGP 3.5bn, despite coverage reaching 1.6bn. The return sought was, however, irrational and does not reflect Egypt’s new economic and fiscal performance nor the improved credit rating, according to the ministry.
The economic crisis in emerging markets, including Turkey, Argentina, and Indonesia, which witnessed a depreciation in their currencies significantly, also contributed to foreigners withdrawing their investments in governments debt instruments as the United States dollar appreciates along with the interest it bears, since the Federal Reserve System raised rates twice, said Aboul Fotouh.
The CBE figures revealed that the total outstanding balances of T-bills reached EGP 1.271tn in July, up by EGP 45.3bn from EGP 1.226bn in June.
Banks’ investments in T-bills increased by EGP 43.1bn in July to register EGP 708.064bn, up from EGP 664.973bn in June.
Private sector banks increased their investment in bills by EGP 42.3bn in July to EGP 321.2bn, compared to EGP 279.08bn in June. Foreign banks’ branches in Egypt also increased their investments in bills by EGP 7.2bn in July to reach EGP 38.3bn compared to EGP 31.08bn in June.
In contrast, public sector banks’ investments in T-bills declined in July by EGP 6.4bn to settle at EGP 335.94bn, down from EGP 342.3bn in June. Specialised banks’ investments also fell by EGP 54m to EGP 12.46bn from EGP 12.514bn.
The National Investment Bank raised its investments in government T-bills to register EGP 131.912bn in July up from EGP 113.975bn in June.