Egypt has returned to the international bond market for the first time in almost four years to address a financing gap estimated at $10 billion for the current fiscal year 2024-2025, which ends in June.
The country issued bonds worth $2 billion in two tranches, with maturities of 5 and 8 years. The indicative yield for the first tranche is 9.25% and 10% for the second tranche, according to Bloomberg data from an informed source. The settlement of the offering is expected on February 4, 2025.
Commitment of $4 Billion
This offering comes after Egypt borrowed $2 billion last Friday from a group of regional and international investors, following the full repayment of $3 billion in facilities in November 2024. It is noteworthy that Egypt sold its first Sukuk in 2023, worth $1.5 billion.
Egypt has committed to keeping its international debt issuances within $4 billion for the current fiscal year, according to Minister of Finance, Ahmed Kouchouk, earlier this month in an interview with “Asharq” during the World Economic Forum in Davos, Switzerland.
Kouchouk’s View on the Issuance Plan
Kouchouk described the country’s international issuance plan as “on track,” expecting a series of varied issuances in the second half of the fiscal year, marking “Egypt’s return to global markets.”
The last international bond issuance by Egypt was in 2021, when the government sold dollar-denominated bonds worth $6.75 billion in two issues, one in February and another in September.
Rising Bond Performance
The risk premium on Egypt’s dollar-denominated bonds has started to decline, showing one of the largest gains among emerging markets, fueled by optimism that the country will benefit from Donald Trump’s return to the US presidency and the ceasefire agreement between Israel and Hamas.
Fadi Gendy’s Insight on Egypt’s Future Outlook
Fadi Gendy, a Fixed Income Portfolio Manager at Arqaam Capital, said, “Egypt will benefit in the short term from Trump’s presidency and the ceasefire between Hamas and Israel, which reduces trade tensions across the Red Sea and improves expectations for Suez Canal revenues.” These tensions had caused a decline in Suez Canal revenues by at least $7 billion, around 60%, last year.
Gendy added, “The choice of a US administration focused on mutual interests, along with the historical good relations between Trump and President Sisi, will also support Egypt.”
Bond Offering Managed by Leading Financial Institutions
Egypt has appointed JPMorgan Chase, Citigroup, HSBC Holdings, Goldman Sachs, Standard Chartered, and Sumitomo Mitsui Banking Corporation to manage its latest bond offering. Goldman Sachs had earlier this month predicted that Egypt would sell debt ranging from $3 to $4 billion in the first half of the year.
