Egypt pulls debt sale plug
Egypt has decided to call off its first debt sale after a rating cut at Standard & Poor’s raised borrowing costs and as Fitch Ratings warned against delaying an International Monetary Fund loan beyond January. The local currency is continuing on its journey of unprecedented deprecation.
The sale which was supposed to take place was to raise 6 billion Egyptian pounds ($969 million) at an auction of six-month and 12-month treasury bills three days after S&P cut Egypt and puts it on the same level as Greece and Pakistan. The country’s rating now stands at B- which doesn’t encourage investors to pump in their money.
This is not the first time authorities have delayed transactions and $5 billion loan from the International Monetary Fund is an example.
Speaking about the government’s decision to cancel the sale, Nour Mohei-El-Din who serves as the assistant general manager for treasury at BNP Paribas Egypt said “the government was trying to set a ceiling of 14% on the one-year bills, which was unacceptable for investors because of the S&P credit rating cut.” The head of the Treasury bill at the Cairo-based head of treasury at Arab Banking Corp spoke about the rationality of investors. According to him, “it’s natural for investors to demand higher returns after S&P’s rating downgrade,”
Egypt is experiencing a difficult time and the referendum on the new constitution divided the people in what seems mush like Islamists against moderates or liberals and the streets have been taking s hostages. Last week, the finance minister sold six-month notes last week at an average yield of 13.3% and one-year securities at 13.54%, but the Egyptian pound is weak enough for the state to be cautious with financial dealings.