Thursday, November 10, 2016

Egypt pumps $2 bn into banking system from bond issue

Egypt's central bank said Thursday that it had issued $2 billion in bonds to international creditors to buy up assets and restore liquidity to its troubled financial system.

It did not elaborate on who the lenders were, saying only that the bonds had been taken up by a "consortium of international banks" and would have a maturity of one year.

It said the entirety of recent Egyptian government bond issues had been offered as security for the loan.

"The financing transaction was provided by the banks against the entire amount of newly issued Arab Republic of Egypt dollar-denominated sovereign bonds with maturities of December 2017, November 2024 and November 2028," it said.

The Egyptian economy has been reeling ever since the Arab Spring revolution of 2011. A series of extremist attacks on foreign tourists have dealt further damage.

In the first couple of years after the 2013 overthrow of Islamist president Mohamed Morsi by then army chief, now President Abdel Fattah al-Sisi, Saudi Arabia and its Gulf Arab allies extended substantial credit to shore up the financial system.

But relations have since frayed amid differences over the civil war in Syria and for the past two months Saudi Arabia has halted promised loan-funded deliveries of fuel.

Sisi has pledged to carry out long-delayed structural reforms demanded by international lenders even at the expense of austerity measures that could fan social discontent.

In return the International Monetary Fund has promised to recommend approval of a $12 billion loan for Egypt when its board meets Friday.

Last week, the central bank floated the Egyptian pound, which resulted in a steep devaluation and sharp price rises.

The country has endured months of shortages of products ranging from sugar to baby formula.

The emergency bond issue came amid a dollar crunch that has led to a thriving black market and a slump in imports, and caused the pound to lose nearly half its value against the dollar.

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