Other BriefingsEgypt Issues RMB3.5 billion In ‘Panda Bonds’
China’s Currency Begins a Global Take Up as a US Dollar Alternative
Cash-strapped Egypt has issued 3-year Panda Bonds worth RMB3.5 billion (US$479 million, or E£14.8 billion) its finance ministry said on Monday (October 16), the latest in a string of less conventional borrowings as it grapples with a mushrooming foreign debt repayment schedule.
The Panda bonds, Egypt‘s first such issue, were priced at 3.5 per cent annually for three years, Finance Minister Mohamed Maait said, stated that is a lower interest rate than for US dollar-denominated bonds.
Panda bonds are bonds denominated in Chinese RMB yuan but issued by foreign borrowers.
Cairo has been looking to tap less conventional sources of finance since a foreign borrowing spree caused its repayment schedule to balloon and sent many traditional investors concerned. Egypt’s foreign debt has quadrupled over the last eight years. As of end-March 2023, the government had US$11.76 billion in medium- and long-term debt coming due in the second half of 2023, including a US$500 million Eurobond maturing on November 20, in addition to US$14.6 billion due in the first half of 2024, according to the Egyptian Central Bank.
Last month, Egypt arranged a currency swap with the UAE worth US$1.3 billion and in August the cabinet agreed to issue five-year Japanese samurai bonds worth US$500 million, denominated in the Japanese Yen.
In February, it raised US$1.5 billion in three-year Islamic bonds, known as sukuk, at a yield of 11 per cent.
Rising global interest rates and escalating geopolitical tensions, including US-led sanctions, have seen countries shift away from the US dollar, while part of Beijing’s Belt & Road Initiative strategy is to place more emphasis on Chinese RMB Yuan-denominated investment deals. There is likely to be more emphasis on RMB-denominated investments and financing as stakeholders look for ways to mitigate political risk. Rising US dollar funding costs are likely to make US dollar use contract globally as sponsors and investors take time to adjust to the new geopolitical realities.
China has a healthy diplomatic and trade relationship with Egypt, with China’s Belt and Road Initiative aligned with Egypt’s 2030 National Development Plan. China and Egypt have also deepened trade relations with exchange agreements, local currency swaps, financial assistance, and loans from Chinese institutions. Egypt is poised to join the BRICS group from January 2024 and is a member of the BRICS New Development Bank.
Chinese investment in Egypt has increased over the past 10 years, and more than 140 Chinese companies now play an important role in Egypt, including major infrastructure projects.
In 2021, China exported US$18.1 billion of goods to Egypt, while Egypt exported US$1.17 billion to China. China’s total investments in Egypt in the fiscal year 2021-2022 were US$563.4 million.
As recent indicators, in June 2023, China exported US$1.34 billion to Egypt and imported US$91 million in return. That month, the top exports of China to Egypt were telephones, synthetic filament yarn and woven fabrics, flat panel display modules, cars, and light fixtures. The top imports from Egypt to China were refined petroleum, crude petroleum, starch residue, marble, alabaster, and raw cotton.
Related Reading
- Egypt’s Membership Of BRICS: Opportunities and Prospects
- Egypt, Courted By China & Russia, Sees Exports Rise
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