Egyptian Cabinet approves Euroclear deal for local debt

Egyptian Cabinet has approved on Thursday an agreement with Belgium-based Euroclear clearing house to settle the country’s domestic debt transactions.

Egyptian Ministry Finance sign an agreement last April with Euroclear Bank, Europe’s biggest settlement house for securities. The agreement will see Euroclear Bank and the Egyptian ministry working together to create the appropriate market conditions for local currency sovereign debt issuance.

The intention is for the market to eventually become Euroclearable, creating “a cross-border link to enable international investment in Egyptian domestic debt instruments,” according to an earlier statement by Euroclear.

The Euroclear direct link will help the market expand its institutional investor base by facilitating access to Egyptian government securities. It could also lower the country’s borrowing costs and diversify its investor base, the Egyptian Cabinet said in its statement later in the day.

Egyptian government hopes its agreement with Euroclear would be a step towards the inclusion of Egypt’s local currency bonds in the JP Morgan Emerging Market Bond Index.

Euroclear settles transactions in international and domestic securities in dozens of countries. Enlisting its services would make it easier for foreigners, who currently have to go through a local bank, to invest in Egyptian pound-denominated debt.