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Egypt’s Treasury Bill Auction: Addressing Debt Amid Economic Pressures

January 2, 2024
Photo credit: Al-Ahram.

The Central Bank of Egypt (CBE) is auctioned USD 850 million (EGP 26.2 billion) worth of one-year USD-denominated treasury bills on Sunday, 31 December, in an effort to refinance existing debt.

The auction recorded an average yield of 5.149 percent for these bills. Responding to a global interest rate hike in the last quarter of the previous year, the Ministry of Finance responded by doubling the interest rate on auctions of Treasury bills denominated in dollars or euros.

Treasury bills (T-Bill) are  a short-term financial obligation supported by the Finance Ministry, featuring a one-year maturity period that depends on interest rate forecasts. The CBE commonly issues treasury bills on behalf of the Ministry of Finance to address budgetary gaps.

In the fiscal year 2022/2023, Egypt’s budget deficit constituted six percent of its Gross Domestic Product (GDP). During the same fiscal period, the nation’s debt-to-GDP ratio stood at 95.6 percent, at EGP 9.8 trillion (USD 318 billion).

This auction is part of the Egyptian government’s broader efforts to supply US dollars in response to a significant scarcity, particularly in light of the prevailing parallel market dominance.

While the official exchange rate designates one US dollar as equivalent to approximately 30.90 Egyptian pounds, the black market registers a value ranging from 51 to 52 EGP against the local currency.

Meanwhile, Egypt’s ongoing assessment for a USD 3 billion (EGP 92 billion) loan agreement with the International Monetary Fund (IMF) has encountered multiple postponements in recent months, and a definitive due date for its conclusion has not been announced yet.

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