As IMF deal nears, Egypt secures $2 billion in financing

Egypt has secured $2 billion in financing from international banks, a day before the International Monetary Fund’s board would meet to consider a $12 billion loan officials say will help restore investor confidence in the country’s economy.

The central bank said it “initiated a repurchase transaction” with overseas banks that has a maturity of one year, with the funding provided against newly issued dollar-denominated sovereign bonds. It’s the latest effort to bolster foreign reserves and ease a dollar shortage crippling the economy, following last week’s decision to float the Egyptian pound along with a raft of measures aimed at stabilizing the government’s fiscal position.

The finance ministry said it sold $4 billion in bonds on the Irish Stock Exchange “for the benefit” of the central bank, which used part of it as collateral to execute the agreement. That means the fresh funding going toward Egypt’s reserves amounts to $2 billion, Deputy Finance Minister Ahmed Kouchouk said.

Finance Minister Amr El-Garhy said on Al-Arabiya television that bonds were chosen over other financing options due to “elevated” interest rates in parts of the market. The government issued a $1.36 billion bond maturing in December 2017 at 4.62 percent, a $1.32 billion note maturing in 2024 at 6.75 percent and a $1.3 billion bond maturing in 2028 at 7 percent, the ministry said.

The ministry said the issuance was separate from its plan to issue international bonds in the coming period, though El-Garhy said that may now be delayed.

IMF Managing Director Christine Lagarde said this week she would recommend the fund’s board approve Egypt’s loan when it meets on Friday.

Source: Bloomberg