Egypt’s political crisis is throwing into disarray a pledge by Hosni Mubarak’s government to cut the budget deficit by more than a half by 2015, threatening to raise borrowing costs for the president’s successor.
Unprecedented protests seeking the end of Mubarak’s 30-year rule have already pushed the yields on Egypt’s Treasury bills to the highest level in two years. Yields on the government’s 5.75 percent bond due in April 2020 reached a record of 7.2 percent on Jan. 31 before easing to 6.3 percent yesterday.
“Everything that has happened in the current political crisis is going to make it more difficult to reach the target,” said Ann Wyman, the London-based head of emerging markets research for Europe at Nomura Holding Inc., in an e-mail. “Tax revenues will likely decline, subsidies are increasing, public sector wages are going up and interest costs are rising.”
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