Egypt Markets First Eurobonds Since 2015

Egypt is pushing ahead with plans to tap overseas bond markets, bolstered by a $12 billion loan from the International Monetary Fund—the lender’s largest in the region.

A marketing roadshow for Eurobonds worth as much as $2.5 billion begins in Abu Dhabi and Dubai on Tuesday, and will take in New York, Boston, Los Angeles before wrapping up in London on Jan. 23. Egypt plans to offer 5-year and 10-year maturities, and may consider a 30-year tranche, Bloomberg reported.

A shortage of hard currency derailed economic growth since Egypt last sold $1.5 billion of 10-year international bonds in June 2015 at 5.875%, though a recent borrowing spree from the IMF, the World Bank, Saudi Arabia and others has boosted coffers.

Even with its renewed funding, the central bank won’t lend to the government as liberally as it used to, and will keep reserves as “a cushion for possible economic shocks,” according to Noaman Khalid, an economist at Cairo-based CI Asset Management. That has forced the government to borrow at an unsustainable rate of about 20% in local debt markets, he said.

Egypt may issue as much as $6 billion of international bonds this year, Finance Minister Amr El-Garhy told Bloomberg in November. The current sale was scheduled for November, but was delayed due to market volatility following Donald Trump’s election victory.

The ratio of local debt to gross domestic product reached 92.8% on June 30, according to initial ministry of finance data. Foreign debt reached $55.8 billion, equivalent to 18% of GDP—the figures don’t include debt accumulated since then, including the first tranche of the IMF loan.

The forecast for the current fiscal year which began on July 1 was revised down to 4% from 5%. It was 4.3% in the last fiscal year and 4.4% a year earlier.