More investor confidence, lower debt costs

More investor confidence, lower debt costs

By Ahmed Kamel

Egypt is gearing up to rejoin the JP Morgan’s Government Bond Index Emerging Markets as of the end of January 2022. The North African country will join the index with a total of 14 issuances worth $26 billion, accounting for 1.85 per cent of the index, according to Finance Ministry data.

The relisting simply means more investor confidence and lower debt costs.

The country’s relisting is forecast to bolster external debt management and bond issuances in the long run. It also reflects the state’s endeavors to reduce the cost of public debt, as part of comprehensive economic reforms.

In 2011, JP Morgan delisted Egypt from its GBI-EM index following the January 25 Revolution. Egypt and South Africa are the only two countries in the Middle East and Africa listed on JP Morgan’s GBI-EM index.

Before citing the indications of rejoining the index, it is crucial to understand what happened to make JP Morgan relist Egypt. In 2016, the state launched an economic reform program, of a currency float was a cornerstone that unleashed other successive monetary and fiscal reforms.

The flotation of the pound is deemed to be the pillar of all economic reforms and measures taken since November 2016. The relisting will likely enhance the issuance and management of sovereign external debts, as the index deepens the confidence of investors, who buy into Egypt’s Eurobonds.

A quick look into Egypt’s foreign debt situation, especially after the Covid-19 pandemic, shows the significance of being part of JP Morgan’s GBI-EM index. Egypt is scheduled to repay the first installment of bonds, worth $2.58 billion, by the end of January 2022. The second installment worth $1.53 billion will be due in January 2023, according to data from the Central Bank of Egypt (CBE).

These bonds were issued immediately following the currency float in 2016. The country’s balances of bonds stood at $27.25 billion in June 2021, according to CBE data.