By: Mostafa Adel
Cairo – Mubasher: Due to Egypt's financial crunch, the government and Central Bank of Egypt (CBE) have taken various steps to provide the necessary funding for the general budget and budget deficit.
Most of these steps involved issuing bonds and treasury bills, which rose by 10% year-on-year in 2016.
The CBE has also launched a total of 66 dollar-denominated auctions, totalling $7 billion this year to finance imports.
EGP-denominated issuances
Government issuances in local currency, including bonds and T-bills, reached EGP 1.136 trillion in 2016, up 10% from EGP 1.022 trillion in 2015.
The government issues bonds to finance the budget deficit. Government banks are the top subscribers in these issuances.
The Ministry of Finance (MoF) also cancelled around EGP 67.15 billion worth of issuances in the fourth quarter of 2016 after receiving the first tranche of the loan by the International Monetary Fund (IMF) worth $2.75 billion.
Higher yields
Yields on government issuances reached record high surpassing 20% after the floatation of the Egyptian pound against the dollar on 3 November, after which it fell once more to between 16.681% and 19.112%.
The CBE's decision to raise interest rates by 3% resulted in a surge in government bond yields, which in turn raised the cost of yields in the general budget.
The cost of yields for 2016's budget have exceeded EGP 330 billion, compared to an earlier estimate of EGP 292 billion, due to the rate hike, and up from last year's EGP 244 billion.
USD-denominated auctions
The CBE also issued $7 billion worth of auctions to local banks during the year to finance imports amid the decline of foreign currency.
Following the floatation of the EGP against the dollar, the CBE sold dollars ranging from EGP 7.73 per dollar, to EGP 14.64 in its 3 November auction.
Euro-denominated bills
The CBE also issued EUR 1.33 billion in two treasury bill issuances to local banks. The first tranche was worth EUR 651.9 million, while the second was worth EUR 688 million. The yields on the bills amounted to 2.298% and 2.300%, respectively.
Translated by: Nada Adel Sobhi
