Egypt is close to completing a new legal framework for its secondary bond market and is taking other measures to improve bond trading, outgoing investment minister Mahmoud Mohieldin said on Tuesday.
Egypt has been streamlining rules for both corporate and government instruments over the last year as it seeks to spur fixed-income trade and expand the country's debt markets, which lag far behind its equity markets in size.
"The authority responsible for financial services regulations..is putting the final touches for the improvement in the legal framework," said Mohieldin, who left his position as Egypt's investment minister to take a senior World Bank post.
He did not say when the new framework might come into effect. The government has said it hopes to set up a secondary bond market this year.
“There is going to be work as well in areas related to the trading of bonds and encouragement of different financial institutions, but subject to rules of engagement in terms of capacity to deal with bonds and fixed-income instruments," Mohieldin added.
The ministries of finance and investment last year approved a plan to allow investment banks to act as primary dealers in treasury bond auctions — now restricted to commercial banks — but until now no licenses have been granted.
“This will be left to the Egyptian Financial Supervisory Authority, along with the Ministry of Finance and central bank," Mohieldin told reporters.
Asked about this on Tuesday, Finance Minister Youssef Boutros-Ghali told Reuters: "We're working on it, but we're not there yet."
Mohieldin said the development of local currency bond markets would also be spurred by demand from issuers seeking mid-term funding of three to five years and long-term funding of 10 to 30 years.
These include companies raising financing for private-public partnerships and institutions seeking to securitize their debt.
Al-Mal newspaper earlier on Tuesday quoted Mohieldin as saying the government planned to allow non-Egyptian organizations to issue bonds denominated in Egyptian pounds.
It had received applications for such bond offerings from the World Bank, the International Financial Corporation (IFC) and the African Development Bank, the newspaper reported.
The IFC said there was nothing concrete to confirm, but a spokesperson for the organization said: "We at IFC always look for opportunities that can help spur economic growth and develop the private sector. Bond markets may be a sector that we can consider."
In January, Egypt changed its laws to let utilities and other quasi-government organizations issue bonds in a move to expand its debt market and in April issued a new rule allowing corporations and other bodies to issue bonds in batches once they receive approval from the regulator.
The government also plans to reactivate its repurchase agreement (repo) market and introduce bond lending, an investment ministry official told Reuters earlier this year.
