Government borrows 5.5B in treasury bills Sunday
Central Bank of Egypt -YOUM7 (Archive)

CAIRO: The Central Bank of Egypt (CBE) is set to auction 5.5 billion EGP ($769.2 million) in treasury bills Sunday, amid ongoing efforts to fill a soaring budget deficit, according to CBE’s official website.

The government resorted to borrowing from banks operating in Egypt to cover the budget deficit, which is expected to range between 11 to 12 percent at 200 billion EGP, by the end of the current fiscal year 2013/14, compared to 10.5 percent in 2012/13 FY.

“The bills are scheduled to be offered in two installments; one valued at 2 billion EGP with a three-month term and the second worth 3.5 billion EGP with a 266-day-term,” CBE announced.

Egypt’s economy faced problems since former President Hosni Mubarak’s resignation in the wake of the January 25 Revolution in 2011, registering a budget deficit of over 240 billion EGP during the previous fiscal year 2012/13.

State budget deficit recorded 163.3 billion EGP ($22 billion) during 10 months of the current 2013/14 fiscal year, representing eight percent of the country’s Gross Domestic Product (GDP) that is expected to reach 2 trillion EGP by the end of the current FY, Ministry of Finance (MOF) revealed in a Thursday report.

The government planned to borrow 205 billion EGP in treasury bills and bonds during the fourth quarter of the current fiscal year 2013/2014, including 79 billion EGP in April, according the ministry’s schedule of government securities.

Businessmen, however, complained of the difficulty of getting loans to finance their projects and investments amid the government’s increased borrowing from banks, triggered by the economic turmoil.

But banks tend to lend to the government, which they consider a safe haven, with guarantees of timely repayment and higher interest rates than retail lending.

Egypt’s budget deficit could reach 14.5 percent of its GDP, totaling between 340 to 350 billion EGP in the fiscal year 2014/15, if economic reforms are not implemented. However, it may fall to 10 percent if such reforms are applied, according to the Ministry of Finance.

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