Foreign investments in Egyptian debt instruments have risen to historic levels due to the high interest rates in the country.
Mohamed Hegazy, head of the debt management unit at the Egyptian Ministry of Finance, said foreign holdings volume in Egyptian debt instruments, including treasury bills and bonds, had risen to $28.5 billion until the end of last February.
Bloomberg attributed this turnout to the rise in real interest rates in Egypt, which ranks second after Vietnam among more than 50 major economies tracked by Bloomberg, in addition to returns of 1.7 percent since the end of December, compared to an average drop of 2.6 percent across emerging markets, according to Bloomberg Barclays Indicators.
Egyptian debt instruments
Foreigners have pumped billions into the Egyptian debt market since the authorities devalued the currency in late 2016, as part of the comprehensive economic program supported by a $12 billion loan from the International Monetary Fund.
Due to COVID-19, cash flows in Egypt have outflew. About $17.5 billion exited the country in the spring of 2020.
“Egypt is attracting more interest as it seeks to settle its domestic debt with Euroclear Bank SA in Belgium later this year,” Bloomberg stated.
The agency added that Egypt announced meeting the requirements to include its banknotes in the government bond index in emerging markets affiliated with JPMorgan Chase & Co, which attracts investments from passive funds that follow the scale.
Hegazy said that the percentage of net bond issuances from local offerings rose to 110 percent by the end of February, surpassing the 80 percent target, which the state wanted to reach by June.
“The new debt instruments issued in 2021 may attract more investors and reduce borrowing costs,” he added.
The international bond bulletin issued by Egypt two weeks ago showed that the country must pay foreign liabilities of $21 billion during the current year.