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Wednesday, 6 February 2019

Foreign holdings in Egyptian treasuries at USD 13.1 bn by end-Jan

Everything you need to know about the Finance Ministry’s epic presser yesterday — and there is a lot. Foreign holdings in Egyptian treasuries stood at USD 13.1 bn by end-January, Finance Minister Mohamed Maait and Vice Minister of Finance Ahmed Kouchouk said during a press conference held yesterday. January alone saw inflows of USD 900 mn, Maait told reporters. Key points from the presser:

#1- GDP growth target for FY2018-19 is now a bit lower: The ministry has revised downward to 5.6% from 5.8% Egypt’s GDP growth projections for the current fiscal year, which ends in June. The target for the next fiscal year is set at 6%, Maait said. He also reminded us that the IMF is due to complete its final review of Egypt’s economic reform program in July. The IMF approved on Monday the disbursal of our fifth and second-to-last USD 2 bn tranche of its USD 12 bn fund facility.

#2- Fuel hedging may be coming soon: The government has the framework in place to launch its fuel hedging strategy, but has yet to decide on a time frame to pull the trigger, according to Maait. A senior government official had told us on Monday that a number of international banks have approached the government with offers. The official had said the government was also looking to hedge against volatility in the prices of wheat in the coming fiscal year to ensure Egypt meets its budget deficit target. Last December, the government pulled back from fuel hedging contracts with two banks as crude prices turned lower than those in annual budget projections.

#3- The privatization program will resume soon, Maait said, without delving into specifics.A senior government source previously told Enterprise the program is on the agenda for March provided market conditions hold up, adding that the sale of a 4.5% additional stake in Eastern Tobacco is likely still in line to pilot the program.

#4- Asia roadshow confirmed: Kouchouk confirmed the ministry is planning to launch next week an Asia roadshow for Egypt’s upcoming international issuances, starting with Dubai and Abu Dhabi. The ministry is planning to sell between USD 3-7 bn in USD- and EUR-denominated bonds, in addition to green bonds and Egypt’s first JPY-denominated bonds.

#5- The ministry’s comprehensive debt strategy has already been rolled out: A recent focus on promoting long-term treasuries is part of Egypt’s new debt control strategy, which the ministry drafted last month and is set to officially unveil next month. The target of the strategy is to eventually increase the average tenor of all sources of debt to five years,Kouchouk said.

#6- A decision on whether we seek another IMF package will be made by July “in the country’s interest,” Maait told reporters. Speculation had risen late last year that authorities were planning to ask the IMF for further funding, but Maait at the time denied the reports. Egypt will begin making repayments for the USD 12 bn facility starting mid-2020. The repayment plan includes installments of between USD 250-300 mn every six months for five and a half years, Kouchouk said.

#7- Egypt’s national outstanding debt to foreigners has reached USD 10.5 bn, Kouchouk said, noting that annual interest payments on both foreign and local debt increased to EGP 207 bn in the first half of FY18-19, up 19% y-o-y from EGP 173 bn.

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