Egypt is looking to increase its share of long-term debt to 40% of annual local issuance by the end of fiscal year 2019/2020 from 5% in FY17/18, the country’s finance minister Mohamed Maait said in an interview with Bloomberg.
The government aims to raise the average maturity on debt to four years by the end of June 2020, compared to 1.9 years in FY17/18, he added.
The minister expects that the first international issuance during FY19/20 will be denominated in US dollar, noting that issuing sukuk, green bonds, Panda bonds in China’s Renminbi (RMB), and Samurai sales in Japanese yen (JPY) are also under consideration.
Maait expressed hopes for striking a Euroclear deal by next January and fulfill requirements for JPMorgan by July 2020.
Foreign investors have been lured to the Egyptian debt instruments due to their high real interest rate of 5.7%; however, the demand may be dampened as the Central Bank of Egypt (CBE) lowered interest rates by 250 basis points (bps) over the last two months.
Maait noted that a real return of about 3% would be “a reasonable real interest rate that keeps Egypt attractive for foreign investors.”