Egypt expects debt to become "euroclearable" in October – minister

CAIRO (Reuters) – Egypt has signed an agreement with Euroclear, Europe's largest securities settlement center, to allow its sovereign debt holders to trade outside the country in six months Minister of Finances.

Mohamed Maait also told Reuters that Egypt hoped to announce a new sovereign debt issue by the end of September and that it would be eligible for clearing via Euroclear, a company based in Belgium.

"Hopefully by October this year, we will begin to incur the first part of our debt, making it" euroclearable, "Maait said during a phone interview Saturday night.

The government plans to issue "green bonds, samurai, panda, sukuk and infrastructure bonds," he said.

Maait was talking about Washington, where Treasury officials from around the world gathered for the spring meetings of the World Bank and the International Monetary Fund.

Euroclear is scheduled to officially announce its memorandum of understanding with Egypt on Monday, a source close to the dossier said.

Euroclearability is considered one of the last stages of financial market development and can significantly reduce borrowing costs for emerging market economies, says PwC.

The deal will help "create the right market conditions for sovereign debt issues in local currency," according to a draft Euroclear press release, accessed by Reuters and due to be released Monday.

"The intention is that the market will eventually become Euroclearable, thereby creating a cross-border link permitting international investment in Egyptian domestic debt," the statement said.

Debt settlement via Euroclear requires a high degree of transparency as well as detailed information on the size and structure of the debt to be issued, among other aspects of the Euroclear rules.

In February, Egypt sold $ 4 billion worth of euro-denominated eurobonds and this month issued € 2 billion ($ 2.3 billion) worth of bonds in euros.

Maait also said in the interview that Egypt plans to divest stakes in at least five or six other state-owned companies by the end of June 2020.

As part of a three-year economic reform program with the IMF at the end of 2016, it plans to use proceeds from divestments to help boost public finances. Egypt has benefited from a $ 12 billion loan from the IMF.

In March, the government sold 4.5% of Eastern Company, the Egyptian monopoly cigarette manufacturer, for the first time that it sold publicly held shares for 10 years.

The sale was scheduled for last year, but was delayed as a result of falling prices of emerging-market badets around the world.

"We are on the right track, we can say something before June 2019, but definitely, God willing, we will say more with the new exercise," Maait said of spending statements. Egypt begins in July.

He declined to say which company would be offered next because "it hurts when we announce early".

Maait said that Egypt had put in place a protection mechanism against oil price fluctuations, a measure to avoid budget shocks.

"Egypt is ready and Egypt uses the hedging mechanism whenever it needs it," he said.

A wheat price hedge plan that was being discussed with the banks in October "has not materialized," but remains "on the table" and is under study, he said. declared.

Stephan Pouyat, global head of capital markets and fund services at Euroclear, told Reuters that the Euroclear deal with Egypt would be expanded in the future.

"We will not just do the government's obligations. We will start with this because it is what international investors need, "said Pouyat.

He said that Euroclear wanted to "clarify (to investors) that (Egypt) had a long and successful yield curve to create the benchmark needed for the business sector. … and that it will greatly facilitate any form of coverage. "