Egypt to auction T-bills valued 600 mn euros

To address dollar liquidity scarcity
Egypt to auction T-bills valued 600 mn euros
The Central Bank of Egypt (Photo Credit: Reuters)

According to a Reuters report, the Central Bank of Egypt (CBE) announced its intention to conduct an auction on August 14 for euro-denominated treasury bills (T-bills) with a total value of 600 million euros, spanning a one-year period.

Due to the scarcity of dollar liquidity and the increasing disparity between the official exchange rate and the parallel market rate, the Government is actively pursuing foreign currency funds to fulfill its obligations.

The timing remains uncertain, but analysts emphasize the necessity for authorities to devalue the Egyptian pound.

Read more: Moody’s says Egypt review continues amidst liquidity crisis, reform efforts

Ziad Daoud, the chief emerging markets economist for Bloomberg Economics, emphasized that the question regarding the devaluation of the pound is not why, but rather when and by how much.

Daoud stated that due to net outflows and the lack of support from portfolio flows and foreign direct investment, the $10 billion deficit does not receive substantial backing. Consequently, there exists a substantial disparity between currency demand and supply, necessitating further currency depreciation.

It was also highlighted by Dawood that another factor driving the need for a reduction in the Egyptian currency’s exchange rate is the negative figures observed in the net assets of both CBE and the banking sector as a whole. This situation creates additional pressure on their stability, as they have not experienced such significant negative levels in the past.

EGP 42 bn worth of T-bills

On Thursday, CBE disclosed the issuance of local currency T-bills amounting to 42 billion pounds on behalf of the Ministry of Finance (MoF). This measure aims to finance the budget deficit.

The bank stated that the offering consists of two segments. The first segment is for 182 days, with a value of EGP 18.5 billion, and the maturity date set for February 13, 2024. The second segment is for 364 days, with a value of EGP 23.5 billion, and the maturity date set for August 13, 2024.

CBE increased the average weighted rate of return on T-bills as follows: for the 91-day bills to 24.19 percent, for the 182-day bills to 24.225 percent, and for the 364-day bills to 24.08 percent.

In its recent auction, Egypt successfully sold treasury bills with a total value of 94.63 billion pounds across various maturities, including 91, 182, and 364 days.

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