** #4 EXCLUSIVE- Higher yields on T-bonds could push up debt service bill by c. EGP 50 bn this fiscal year: Persistently high yields on treasury bonds could add as much as EGP 50 bn to Egypt’s debt service bill during the current fiscal year, a government source exclusively tells Enterprise. The news is not surprising, given the FY2018-19 state budget had initially set debt service costs at EGP 541 bn, based on the expectation that yields on treasuries would hover around 14.7%, down from 18.5% during the last fiscal year. Yields have instead been on the rise, averaging around 19% since the fiscal year started in June, raising the costs of debt service in the budget and prompting the treasury to send a message to investors with the cancellation of four bond auctions.

The news comes after bidders at last week’s T-bond auction demanded yields as high of 19.9% on 10-year bonds, central bank data showed. The next auction is scheduled for today with five- and 10-year t-bonds worth a combined EGP 1.25 bn on offer.

As is typical in such cases, the Finance Ministry could seek House approval for an overdraft on the state budget in the second half of the fiscal year if interest rates and global oil prices remain at their current levels, the source tells us. The ministry sought a EGP 70.3 bn overdraft for the previous fiscal year’s budget, which was in large part necessary to cover higher debt service costs. Debt control has become a cornerstone of the government’s fiscal policy; President Abdel Fattah El Sisi is expected to announce soon a four-year strategy to reduce Egypt’s debt to 70% of GDP, Finance Minister Mohamed Maait previously said.

House wants to discuss budget deficit, fuel subsidies with the gov’t: Meanwhile, members of the House’s planning and energy committees want to sit down with Finance Minister Mohamed Maait and Oil Minister Tarek El Molla to discuss ways to keep the state budget deficit in check in light of rising oil prices, according to a domestic media report. Higher-than-expected oil prices could see Egypt’s fuel subsidy bill in FY2018-19 jump to EGP 100 bn, up from the originally expected USD 89 bn, a government source told us earlier this month. The reps. are wagging their finger at the Oil Ministry for rejecting parliament’s calls to increase fuel subsidy allocations when the state budget was up for discussion earlier this year. A government source had previously told us that Egypt is likely to miss its deficit reduction target this fiscal year, with the gap set to come in at something closer to 8.6% rather than the 8.4% originally forecast.