Egypt’s finance ministry said that the government plans to raise its share of longer-dated debt to 40 per cent of annual domestic issuance by the end of the current fiscal year, from five per cent in 2017-18, reported Bloomberg.
Mohamed Maait, the Egyptian Finance Minister, said that with a gradual shift away from short-term T-bills and toward instruments such as treasury bonds, the goal is to push the average maturity on the debt to around four years by June 2020, up from 1.9 years in 2017-2018.
The strategy involves diversifying debt instruments, currencies and investor bases and could see the introduction of new instruments such as variable-rate bonds linked to inflation and zero-coupon securities.
“You need some sort of diversification, this is the main concept we are adopting,” said Maait.
Maait said that the first international issuance this year is likely to be in US dollars, Sukuk, as well as green bonds, Panda bonds in Chinese renminbi and Samurai sales in Japanese yen.
Investor interest in Egyptian local debt could be boosted by a future agreement with Belgium-based Euroclear—which settles transactions in securities in dozens of countries—as well as meeting the technical specifications to include Egyptian debt in JPMorgan’s Emerging-Market Bond Indexes (EMBI), said Maait.
The finance ministry hopes to conclude a Euroclear deal by January 2020 and meet requirements for EMBI by July of the same year.
Egyptian debt has been attracting foreign investors with one of the world’s highest real yields—meaning the rate investors earn when stripping out inflation—at about 5.7 per cent currently.