Government increases borrowing from domestic market to highest level ever during Q2 2017/18

The Finance Ministry revealed its intention to borrow EGP 389.25bn through treasury bills and bonds during the period from 1 October until the end of December

Figures obtained by Daily News Egypt revealed the government's intention to expand the process of borrowing from the domestic market to fill the chronic deficit in the state budget significantly during the second quarter (Q2) of fiscal year 2017/2018.
According to the figures, the Ministry of Finance plans to issue treasury bills and bonds worth EGP 389.25bn between 1 October until the end of December, the largest borrowing rate for the government by means of debt instruments since the launch of these instruments on the market at all.
The country suffers from a deficit in the general budget estimated at EGP 379.6bn during the fiscal year (FY) 2016/2017, according to Minister of Finance Amr El-Garhy.
The Ministry of Finance's plan reveals that the government intends to issue treasury bills worth EGP 357.5bn and issue treasury bonds worth EGP 31.75bn.
The Central Bank of Egypt (CBE), which is acting on behalf of the government, will issue treasury bills and bonds worth EGP 145.75bn in October, EGP 122bn in November, and EGP 121.5bn in December.
According to the plan, 91-day treasury bills worth EGP 87.25bn, 182-day bonds worth EGP 87.25bn, 273-day ones worth EGP 91.5bn, and 367-day ones worth EGP 91.5bn will be issued.
The government's plan also includes the issuance of three-year bonds worth EGP 7.5bn due in October 2020, other three-year bonds worth EGP 3bn due in December 2020, and five-year bonds worth EGP 7.75bn maturing in October 2022.
The government also issued seven-year bonds worth EGP 7.25bn due in December 2024, ten-year bonds maturing in November 2025 worth EGP 2bn, and other ten-year bonds maturing in November 2027 with a value of EGP 4.25bn.
According to a prominent bank operating in the local market, the deficit of the state budget and the government's resorting to borrow will not end, especially in light of low-state revenues and insufficient.
He pointed out that the increasing dependence of the state on borrowing increases the risk of the state and reduces its credit rating, and it may lead to a reduction of the classification of banks that contribute to the bridging of this burden by covering the government's offering of bonds and treasury bonds.
The government had borrowed EGP 947.099bn through treasury bills and bonds during the period from January to the end of September.
The government borrowed EGP 299.019bn from January to the end of March. It borrowed EGP 342bn from April until the end of June 2017. It also borrowed EGP 306.08bn from July until the end of September 2017.
According to the CBE, total outstanding balances of treasury bills and bonds until the end of July amounted to about EGP 1.563tr, of which about EGP 679.76bn are bonds and EGP 883.828bn are treasury bills.
According to a system agreed between the government and banks since 2004 under the name of "main dealers", the government is offering treasury bills and bonds in the local market through 15 banks participating in the system. These banks are re-offering part of these bills and bonds to their individual customers and domestic and foreign institutions.