Egypt Offers $2 Billion Debt as IMF Says ‘Bold’ Steps Needed

Egypt plans to offer 13.5 billion pounds ($2 billion) of domestic debt over the next week as the government struggles to convince the International Monetary Fund to accept a revised economic plan.

The country with the second-highest ratio of debt to economic output among its Arab peers will seek bids for 6.5 billion pounds of six- and 12-month treasury bills March 14, according to central bank data on Bloomberg. It will offer 5.5 billion pounds of three- and nine-month notes March 17 and 1.5 billion pounds of five- and seven-year bonds the following day.

The IMF, which Egypt has worked with for almost two years to secure a loan agreement, said yesterday the country’s government must take “bold and ambitious policy actions to address its economic and financial challenges without further delay.” Egypt lowered benchmarks agreed upon with the Washington-based lender in November, including the budget deficit target, in a revised economic program announced amid political unrest that has stalled the $4.8 billion loan.

“Time is not on Egypt’s side, and, in such a poor political environment, that’s made us very anxious over its capacity to get the IMF deal done,” Simon Williams, chief Middle East and North Africa economist at HSBC Holdings Plc in Dubai, said today by phone. “Every month that passes without an IMF agreement is another month of lost economic growth, higher public debt and fresh pressure on reserves.”

Premium Increases

Egypt isn’t looking for a Rapid Financing Instrument, or emergency funds, from the IMF, Finance Minister El-Morsy El-Sayed Hegazi said in an interview in Cairo today. The premium investors demand to hold Egypt’s dollar-denominated debt climbed 21 basis points, or 0.21 of a percentage point, yesterday to 562, according to JPMorgan Chase & Co.’s EMBIG Egypt Sovereign Spread. That’s the highest level since July and compares with a Middle East average of 413 basis points.

Still, local borrowing costs have declined amid increased demand from banks as unrest stalls economic growth. The average yield on one-year securities fell 60 basis points from a four-month high in January to 13.91 percent at an auction last week.

The yield on Egypt’s benchmark $1 billion of 5.75 percent dollar bonds due in April 2020 advanced one basis point to 7.28 percent as of 2:05 p.m. in Cairo. The yield has jumped 124 basis points this quarter, heading for the biggest increase over a similar period since the last three months of 2011.

The pound was unchanged at 6.7632 a dollar, having lost 5.9 percent since the beginning of the year.

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