Until recently, Egypt’s $80bn debt market of treasury bills and bonds was widely viewed in a positive light.
Factors at play included a low debt burden, buoyant domestic economy, a government committed to cutting the budget deficit, liquid local banks that in effect supported the market, an unofficial currency link to the dollar and high interest rates that made Egyptian debt a popular investment for “carry traders”.
This pushed down borrowing costs for the government. At one point last year, the “zero volatility spread” of an Egyptian bond maturing in 2020 was lower than that of a similar-maturity Qatari Diar bond that was guaranteed by the wealthy emirate.
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