Foreign investment in Egypt's domestic debt instruments jumps to $21B in October

CAIRO – 26 October 2020: Foreign investments in domestic government debt instruments jumped to reach $21.1 billion in mid-October, compared to $10.4 billion in May 2020.



Head of the Debt Management Unit at the Ministry of Finance Mohamed Hegazy said that recent financing agreements concluded by Egypt with the International Monetary Fund and other parties encouraged foreign investors to increase their investments in treasury bills and bonds offered by the Ministry of Finance.



He added in statements to "Bloomberg" that although Egypt witnessed the largest capital outflows ever between March and May as part of selling that hit emerging markets around the world, the reversal was driven by the fact that Egypt offers the second-best high return in the world after Argentina.



“We saw a huge foreign appetite in domestic bonds starting in late August despite the global uncertainty,” he said adding that when foreign investors withdrew earlier in 2020, they faced a quick and easy exit, unlike some other markets, which strengthened their confidence in the Egyptian economy.



According to Hegazy, the stable outlook of the three major credit rating companies after the spread of the pandemic, in addition to recent international bond and green bond issuances have raised the appetite of foreign investors, and foreigners now represent 9.4 percent of total domestic debt holdings, up from 5.2 percent at the end of June.



The head of the debt management unit at the Ministry of Finance indicated that the shift to long-term debt also helped reduce borrowing costs, as net bond issuances instead of short-term treasury bills accounted for 71 percent of total net domestic issuances in Egypt at the end of September, compared with 20 percent three months earlier.



“This indicates that the average Egyptian debt maturity reached 3.2 years at the end of June, up from 1.3 years in the same period in 2013.”



According to Hegazy, this shift could give a boost to Egypt's initiative to list its bonds in JPMorgan Chase & Co.'s emerging market indices. Which is seen as a benchmark for investors, along with seeking to make the country's debt deliverable in euros, this could lead to more interest.