The Central Bank of Egypt’s (CBE) move to renew the $3.8bn financing agreement with international banks will provide some support for the stability of the level of foreign exchange reserves, Beltone Financial said.
On Thursday, the CBE agreed to enter into a new repurchase transaction with a consortium of international banks, for a total amount of $3.8bn, a final maturity of 4 years and six months, and an average life of 3 years.
The consortium includes Citigroup Global Markets Limited; Credit Suisse Group AG, London Branch; Deutsche Bank AG, London Branch; First Abu Dhabi Bank PJSC; HSBC Bank plc; HSBC Bank Middle East Limited; ICBC Standard Bank plc; J.P. Morgan Securities plc; Natixis; and Nomura International Plc.
According to the statement, the repurchase transaction will settle on 19 November, following the CBE repayment of the total of $3.1bn, on 15 November, honouring the terms of the previous Repurchase Transaction transacted in November 2017, with a consortium of international banks.
Moreover, the CBE announced that the transaction reflected the continued affirmation and confidence of the international market in the success of the homegrown economic reform programme during the past years. It also stressed the ongoing commitment demonstrated by Egyptian authorities in bolstering domestic economic and financial conditions, which have contributed to Egypt’s improving economic profile, despite increasing risk factors in the global environment and tightening global conditions.
According to Beltone, the renewal of this agreement comes at a time when foreign exchange reserves are under pressure because foreign investors have withdrawn investments from fixed income instruments, which led to an outflow of foreign assets scoring $2.3bn in August 2018.
The 2017 agreement was basically a renewal of the funding obtained by Egypt as part of the $2bn worth repurchase agreement signed in November 2017 through selling USD-denominated treasury bonds that the ministry of finance floated on the Irish Stock Exchange.
The government issued a $1.36bn bond maturing in December 2017 at 4.62%, a $1.32bn note maturing in 2024 at 6.75% and a $1.3bn bond maturing in 2028 at 7%.
The statement indicates that this financing transaction is provided by the banks against the entire amount of Egypt’s dollar-denominated sovereign bonds with maturities in November 2024 and November 2028, in addition to new to be issued Egypt dollar-denominated sovereign bonds maturing in 2026 and 2030.
Beltone referred to the stability of foreign exchange reserves at $4.44bn spanning the last six months, covering imports of 8 months. This led to the improvement of the status of net foreign assets at the CBE, which reached $17.1bn at the end of August, compared to $5.4bn in the previous year.
According to Beltone, these indicators support their expectations for the stability of the pound for the rest of 2018, with the possibility of a slight fluctuation below the level of EGP 18 against the dollar.