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Tuesday, 16 August 2022

Foreign investors are slowly coming back to the debt market

FROM THE DEPT. OF GOOD NEWS- Foreign flows have begun to trickle back into Egypt’s local debt market. Foreign holdings of Egyptian treasury bills rose for the first time in five months in June, a tentative sign that Egypt may have seen the worst of the 2022 emerging-market sell-off which has seen bns of USD leave the country. Foreign T-bill holdings registered USD USD 8.35 bn in June, according to central bank figures (pdf). Foreign T-bill holdings stood at USD 8.10 bn in May.

2022 hasn’t been kind to the capital account: Investors have pulled USD 20 bn of portfolio investment from Egypt this year amid a global emerging-market risk-off triggered by the conflict in Ukraine, surging commodity prices and rising interest rates. Official data shows that T-bill holdings fell 55% between February and May, with most of the outflows occurring in March following Russia’s invasion of Ukraine.

Egypt paid off more foreign debt than ever before in the first nine months of FY 2021-2022, the figures show. Foreign debt repayments between July and March came to almost USD 20 bn, up from USD 10.9 bn in the same period the year before and an all-time record for the nine-month period. Debt repayments in 3Q alone were more than double 3Q 2020-2021 due to higher principal and rising borrowing costs.

Remember: External debt is at an all-time high and rose 17% y-o-y to USD 157.8 bn in the January-March quarter.

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