Egypt converts Qatari funds into 18-month notes

Reuters/Cairo

Qatar provided the funds as deposits with the central bank to help Egypt control its currency crisis and shore up its balance of payments, weakened by political and economic turmoil since a popular uprising ousted Hosni Mubarak in February 2011.

Since the uprising, Egypt has run through more than $20bn in reserves, borrowed billions more from abroad and delayed payments to oil companies to support its currency.

The 18-month notes, which mature on November 28, 2014, will pay 4.25% annual interest, according to data on the website of the Irish Stock Exchange where they are listed.

Analysts said the pricing brought the notes close to international levels, indicating that Egypt’s main financial backer was not prepared to lend at the concessionary rates offered by some international agencies.

Qatar has lent or given Cairo $7.5bn since Mohamed Mursi of the Muslim Brotherhood was elected president last June.

Egypt has been seeking a $4.8bn loan from the International Monetary Agency that would have an interest rate of 1.1%, but it has balked at adopting the economic austerity measures the IMF would demand in return.

The Irish exchange’s website and a statement on Wednesday by Egypt’s finance ministry said Egypt had issued notes worth $2.7bn. It was not clear where the extra $200mn was destined, and Egyptian officials did not respond to requests for details.

The $3bn deposited by Qatar this month will be converted into three-year bonds within days, as soon as the procedures are completed, Al Ahram newspaper quoted Central Bank Governor Hisham Ramez as saying. The bonds will carry an interest rate of 3.5%.

The notes were issued under a $12bn medium-term bond programme that Egypt established this month to finance its budget deficit. A prospectus for the programme included a target of Egypt issuing its debut sovereign Islamic bond, or sukuk, early next year.