Egypt And Morocco Boost Reserves With Bonds

Two north African nations try to stabilize their finances.

Upcoming sovereign bonds to be issued by Egypt and Morocco will help stabilize the fiscal positions of the two sovereign nations and bolstser dwindling foreign reserves.

Egypt seeks to cut its borrowing costs and broaden its fund-raising initiatives with more bonds and has made plans to issue Panda, Samurai, sukuk and green bonds starting this July.

Nadene Johnson, an economist with NKC African Economics, says Egypt should do well after raising as much as $6.2 billion from euro and dollar bond issuances earlier this year, which helped boost official reserves to $44 billion at the end of February, according to the IMF.

“Considering Egypt’s previous issuances have been significantly well received and oversubscribed, it appears that sentiment revolving around the country is still strong,” says Johnson. “Currently, the [global] stance on [bonds] is shifting towards a more dovish tone, which bodes well for Egypt.”

Egypt’s neighbor, Morocco, is seeking a return to the international sovereign bond market after an absence of about five years. The North African country plans to issue $1 billion in dollar-denominated bonds to shore up its foreign reserves. The country plans to follow this up with another bond issue in 2020.

“Morocco is enduring slight pressure on its foreign reserves as a result of lacklustre forex inflows and a widening current account deficit,” Johnson says. “That said, Morocco has a relatively stable economy, which supports overall investor sentiment regarding the country.” In an April note on Morocco, Fitch Ratings said that “refinancing risks are relatively low as public debt is mostly dirham-denominated and held domestically.”

For Morocco, the general government debt has increased from 32.3% of GDP in 2009 to 50.7% in 2018, while government guarantees on state-owned enterprise debt account for an extra 14% of GDP.