March 11 (Bloomberg) -- Egypt’s cost of borrowing for nine-months fell the most since October and the country exceeded a fundraising goal as it invited the International Monetary Fund back to seal a $3.2 billion loan agreement.
The North African country paid an average yield of 15.841 percent, five basis points less than a sale of similar-maturity bills last week, according to data posted on the finance ministry website. That’s the biggest decline since a sale on Oct. 9.
The country accepted bids valued at 4.5 billion Egyptian pounds ($746 million,) 29 percent more than it sought to raise, marking the second straight auction at which the government exceeded its debt sale goal.
The government will hold talks with the IMF in the second half of March to secure the loan package it requested in January, Planning Minister Fayza Aboulnaga said March 7. Last week, Egypt also signed an agreement to borrow $400 million a year for three years from the International Islamic Trade Finance Corp. to help fund purchases of fuel and wheat.
“The government’s ability to obtain funds from sources other than local banks is a good sign that it is decreasing pressure on domestic funds,” Alia Mamdouh, Cairo-based economist at CI Capital said in a telephone interview. “An IMF loan will further help yields drop. If it’s not secured, it will have a significant impact not just on the yields but also on the stock market and the pound because it would signal the inability of the country to do what’s needed to garner the IMF’s confidence.”
Egypt is awaiting parliamentary approval of an economic program that cuts the budget deficit and public debt over the next two years before submitting it to the IMF. The country needs the loan to meet financing needs of about $11 billion by June 2013, Finance Minister Momtaz el-Saieed said last month.
The rate on nine-month bills had surged more than two percentage points since October to 15.923 percent last month, the highest level since Bloomberg started tracking the data in 2006.
The country’s 5.75 percent dollar bonds due in 2020 advanced for a second day on March 9, pushing the yield lower by 14 basis points, or 0.14 percentage point, to 6.68 percent, according to prices compiled by Bloomberg. That’s the lowest level in almost four months.
The Egyptian pound was unchanged at 6.0311 to the dollar on March 9, having lost 2 percent in the past 12 months.
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