Egypt to Start Eurobonds Sale Process as IMF Begins Visit

  • Egypt hopes to secure first IMF payment in about 2 months
  • IMF delegation expected to arrive in Egypt on July 30

Egypt will approach investment banks next week for a potential Eurobond sale, a senior official said, part of the government’s efforts to shore up reserves and finance an economic program that will mainly rely on a $12 billion loan from the International Monetary Fund.

An IMF delegation is set to arrive in Cairo on July 30 for talks slated to last two weeks. Authorities aim to reach a preliminary accord with the Washington-based lender at the end of the visit, Deputy Finance Minister Ahmed Kouchouk told reporters on Thursday in Cairo.

The government said on Tuesday that it’s targeting a total of $21 billion in external financing over three years. The money will support a program designed to restore confidence in an economy squeezed by a crippling dollar crunch that has undermined investor confidence. Planned measures include value-added taxation as well as subsidy cuts to reduce the budget deficit, Kouchouk said.

‘Right Conditions’

Egypt aims to tap international bond markets by October, Prime Minister Sherif Ismail said this week. The government last issued Eurobonds in 2015, raising $1.5 billion.

“If we implement the reform program, and get the IMF’s stamp of approval, our borrowing costs will drop," Kouchouk said. “We’re creating the right conditions to go to the market.”

Egypt’s Eurobonds due in 2025 advanced after the government’s announcement that talks with the IMF were nearing the “final stages.” The yield tumbled 70 basis points, or 0.7 percentage point, on Wednesday and stood at 6.92 percent at 3:03 p.m. in Cairo, according to data compiled by Bloomberg.

Egypt’s foreign-currency reserves have tumbled more than 50 percent since the 2011 uprising that ousted President Hosni Mubarak as the unrest scared tourists and investors away. The reserves have increased 7 percent since September to $17.5 billion last month, central bank data show.

Egypt is rated B- by S&P Global Ratings, six levels below investment grade and on par with Argentina, Greece and Pakistan.

In addition to the $12 billion from the IMF, the remaining money would come from the World Bank, the African Development Bank and other planned bilateral accords. If the deal is finalized, Egypt hopes to receive the first tranche of at least $2 billion in two months, Kouchouk said.

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