Cairo – Egypt is preparing to launch the individual bond market soon, for the first time, in an attempt to expand the base of investors in government debt tools, which is witnessing an increasing demand with the high returns and bonds of treasury to attractive levels.
This step raises questions about the reasons for the availability of this service to citizens, and their impact on banks, which are the largest beneficiary of investing in government debt instruments, and the government’s ability to promote these tools and attract individual investors to them.
This service comes within a strategy to enhance non -banking financing and reduce the state’s dependence on banks, especially with the increase in the debt service bill to more than 70% of the budget revenues or about 47.4% of total spending, according to the Ministry of Finance data.
The following numbers reveal the size of the Egyptian government’s increasing dependence on the debt tools to fill the annual budget deficit gap:
- 2.84 trillion pounds (about 57 billion dollars) the financing gap of the public budget 2024-2025.
- 9.5 trillion pounds (190 billion dollars) the total domestic debt at the end of the third quarter of the year 2024.
The Ministry of Finance aims to raise the issues of local debt tools by 32.9% during the current fiscal year to reach 2.7 trillion pounds (the dollar equals about 50.60 pounds), according to the financial statement of the budget for the fiscal year 2024-2025.
The Central Bank of Egypt, during the meeting of the Monetary Policy Committee in February 2025, remained on interest rates unchanged, for the seventh time in a row at 27.25% – and 27.75%.
However, analysts’ expectations indicate that the central bank will reduce the interest in its next meeting in the second half of April, for the first time since November 2020, with the support of slowing inflation.
The annual inflation of consumer prices in cities fell to 12.8% in February, compared to 24% in January, according to the data of the Central Agency for Public Mobilization and Statistics.
Definition of the initiative
Individual bonds are a governmental debt tool that is sold directly to citizens for fixed returns. Such bonds are used as a way to borrow money from the public, and this model is in place in many countries, and it is characterized by stability and its returns can be predicted and often less expensive compared to other debt forms, and this makes it an effective tool for monetary policy.
During the annual conference of individuals bonds, the Egyptian Ministry of Finance presented its vision to establish a market for individuals bonds, as part of its efforts to develop the capital market.
The Ministry emphasized the pivotal role of these financial tools in expanding the investor base and enhancing economic growth.
Later, the Egyptian Finance Minister, Ahmed Kajuk, revealed that the ministry aims to enable citizens to invest in individuals ’bonds in the context of the government’s endeavor to expand the base of local investors and motivate them to participate in financing development projects.
Regarding the nature of these bonds, Kajuk explained that these bonds will suit the needs of individuals, as the bonds will be available to invest in flexible periods of time and appropriate return prices in a way that guarantees attracting a wide segment of individual investors.
Initiative goals
- Expand the investor base: The individual bond market provides an opportunity for citizens to participate in investing in government debt tools, and this expands the investor base.
- Diversification of financing sourcesThe government enables the government to diversify the sources of financing and reduce dependence on banks.
- Providing investment opportunitiesThe market aims to provide safe investment opportunities with high returns to individuals.
- Promote economic growthThe individuals ’bond market contributes to securing the necessary funding for government projects, and this supports economic growth.
- Development of the capital marketIt contributes to improving the Egyptian capital market and making it more attractive to investors.
The effect of individuals bonds and how they work
Regarding the impact of individuals ’bonds on the financial market and the national economy, banking expert Mohamed Abdel -Al says:“ It is a vital project as a source of financing, and the government is in the process of preparing regulations and regulatory procedures and needs legislation to formally launch it and it is applied in a number of countries in the world like the United States. ”
Abdel -Al, who occupies the membership of the Board of Directors of a number of banks, to Al -Jazeera Net, has the advantages of individuals ’bonds, explaining that they are:
- Safe.
- Do not carry any risks.
- It will be at fixed and reasonable prices.
- Its coupon is spent periodically.
- The government guarantees the payment of religion and benefits.
According to Abdel -Al, the treasury bonds differ from the treasury bills during the entitlement period, where the period of entitlement to the treasury bonds ranges between two years and 15 years and is restricted to the Egyptian Stock Exchange, while the period of the entitlement of treasury bills ranges between 3 months and one year, adding that it enhances collective financing, and contributes to increasing the participation of citizens in supporting public debt.
Not to get out of the concept of financing by borrowing
“The launch of the individual bond market aims to attract financing from unconventional sources, and in the end it is debts on the government and does not deviate from the concept of financing with borrowing.”
But in his speech to Al -Jazeera Net, he pointed out the need to create clear inclusion rules for government bonds on the Egyptian Stock Exchange to facilitate their circulation, especially in light of the current government’s reliance on the debt tools to finance the budget deficit.
According to the Egyptian law, according to Al -Sadi, banks are allowed to include government bonds on the stock exchange, but many of them refrain from this due to the impact of this on their profits, and this difference is a pivotal point compared to savings certificates.
Individuals ’bonds are fundamentally different from traditional savings certificates, according to Al -Sadi. While certificates are adhered to a fixed period of time and financial fines when early withdrawal, the bonds give individuals freedom of trading according to the conditions of the market, which enhances the liquidity of financial tools and transforms savings into dynamic investments.
The economist called for not to raise the ceiling of expectations; The initiative lacks the financial culture needed to attract individual investors to these new tools. Consequently, its success relies heavily on promotional and awareness efforts to highlight these bonds, and this contributes to expanding the base of investors and enhancing financial liquidity.
