Central Bank of Egypt sells $1bn in 3-month treasury bills as yields hit record highs

In September, Egypt’s central bank issued treasury bills worth 50 billion Egyptian pounds as the country was seeking to manage liquidity. Shutterstock
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Updated 09 December 2024
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Central Bank of Egypt sells $1bn in 3-month treasury bills as yields hit record highs

  • Investors submitted bids totaling 78.56 billion pounds, showcasing heightened interest despite the economic pressures
  • Egypt’s inflation rate eased in October, rising 1.5% compared to 2.3% in September

RIYADH: The Central Bank of Egypt sold three-month treasury bills worth 52.75 billion Egyptian pounds ($1.03 billion) in its latest auction on Dec. 8.

According to data from the institution, this amount exceeded the targeted collection of 35 billion pounds by more than 50 percent.

Investors submitted bids totaling 78.56 billion pounds, showcasing heightened interest despite the economic pressures posed by inflation and currency depreciation. 

Egypt’s inflation rate eased in October, rising 1.5 percent compared to 2.3 percent in September, driven by lower food prices. Annual inflation dropped to 26.3 percent, down sharply from 38.5 percent a year earlier.

The auction recorded a minimum yield of 30.10 percent and a maximum yield of 34 percent, with the weighted average yield rising to 31.42 percent, up from 31.2 percent in the previous auction.

In addition to the 91-day bills, the Central Bank also auctioned treasury bills with tenors of 182 days, 273 days, and 364 days. For the 182-day bills, a nominal amount of 7.19 billion pounds was accepted out of 86.35 billion pounds in bids, with a weighted average yield of 30.996 percent. 

The 273-day bills raised 4.41 billion pounds from 48.83 billion pounds in bids, recording an average yield of 28.76 percent. Meanwhile, the 364-day bills secured 2.18 billion pounds from 42.3 billion pounds in submitted bids, with an average yield of 26.24 percent.

The sharp rise in yields comes as the Egyptian pound continues to weaken, surpassing the 50-pound mark against the US dollar. This depreciation has fueled inflationary pressures, driving up borrowing costs for the government. 

The high yields, especially on the short-term bills, reflect both rising inflation expectations and the premium investors demand to hedge against currency risk. Notably, the three-month bills saw robust demand, with 481 bids submitted, of which 435 were accepted, signaling strong investor confidence.

The escalating yields across all tenors underlined the challenges faced by the Egyptian government as it attempts to balance fiscal needs with rising market borrowing costs. 

The strong investor turnout in this auction highlighted the continued appetite for Egyptian government debt, driven by attractive returns despite the risks associated with inflation and currency fluctuations. 

As the economic landscape remains volatile, the Treasury’s reliance on short-term instruments with high yields reflects its strategy to secure liquidity while managing fiscal and monetary pressures.

Similarly, in September, Egypt’s central bank issued treasury bills worth 50 billion pounds as the country was seeking to manage liquidity and support government financing amid rising inflation.  

The move came as part of the CBE’s broader effort to curb inflation and provide investors with short- and medium-term investment options. This also followed a similar issuance on Sept. 26, when the Central Bank of Egypt offered treasury bills worth 50 billion pounds through two auctions.


Vision 2030 can inspire global solutions to land degradation, energy crisis

Updated 9 sec ago
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Vision 2030 can inspire global solutions to land degradation, energy crisis

  • UNCCD executive secretary discusses how Saudi Arabia’s strategy can lead global environmental change

RIYADH: Achieving Saudi Arabia’s Vision 2030 will require significant investment in land restoration and renewable energy, as the nation’s ambitious strategy extends beyond national goals, according to a senior executive.

In an interview with Arab News on the sidelines of COP16 in Riyadh, Ibrahim Thiaw, executive secretary of the UN Convention to Combat Desertification, emphasized that the Kingdom’s transformative national strategy should be a global model.

“Vision 2030 is a national vision from Saudi Arabia. But it can only be achieved if we invest more in land restoration. It can only be achieved if we invest more in empowering communities to manage their resources,” Thiaw said.

He further added: “It is certainly an excellent vision proposed by the Kingdom of Saudi Arabia. But it goes beyond in terms of vision, in terms of ambition. It has to be implemented in many other parts of the world.”

Thiaw highlighted the need for innovative solutions to address global food production challenges. For example, he pointed out the importance of doubling food production by 2050 without exhausting limited resources, calling for the adoption of technologies like artificial intelligence, precision agriculture, and water-efficient systems.

He also noted that Vision 2030 stresses the importance of balancing traditional farming techniques with modern technologies to enhance soil productivity, reduce pollution, and avoid the expansion of agricultural land.

“Saudi Arabia is already doing quite a bit in land restoration,” Thiaw said, referencing efforts through institutions like the Saudi Fund for Development, which has active portfolios across Africa, Asia, and Latin America.

“But we all need to do more,” Thiaw added. “That will probably require that the Saudi Fund for Development, as well as other institutions where Saudi Arabia is the main shareholder, like the Islamic Development Bank, the OPEC Fund, and many other institutions, realign their portfolios to match the ambitions of COP16.”

As a G20 member, Thiaw urged the Kingdom to help rally other nations to meet the G20 goal of restoring 50 percent of degraded land by 2040. The focus, he stressed, must not only be on making commitments but also on ensuring their effective implementation.

“Saudi Arabia will be appreciated if it works with its peers from other countries, with South Africa, which is now the current presidency of G20, and then the future presidencies, as well as all members of the G20,” Thiaw said.

Thiaw also emphasized the critical importance of integrating traditional methods, like underground irrigation, with modern technologies such as desalination and renewable energy to support sustainable development, especially in arid regions. These combined solutions can address challenges like water scarcity and energy demands while promoting economic growth.

“This is where you need new technologies and combine them with the traditional technologies, including the underground irrigation that has been known here for millennia, and so we can use new technologies to make additional water available,” Thiaw said.

He added: “I visited the Saudi pavilion here. I just could not believe what I saw, and from 300 megawatts just a few years back, there are now 44 gigawatts moving to 80 GW. I was stunned!”

Thiaw explained that Saudi Arabia’s progress demonstrates how integrating traditional and new technologies can lead the way in energy transitions, land management, and water accessibility, creating a better future for all.

Key outcomes

Thiaw outlined some of the key outcomes expected from COP16, including decisions on proactive drought resilience strategies to prepare communities, businesses, and governments for future droughts rather than simply reacting to crises.

An additional focus is scaling up commitments to restore degraded land, with a global reserve of 1.5 billion hectares of damaged land, and reversing the trend of losing fertile soil annually — an area the size of Egypt.

He stressed that financing is central to these efforts: “We have indicated in our reports that the world needs to invest $1 billion per day. $1 billion per day needs to be invested in land restoration worldwide. Now that is a huge figure. It’s not small. This is not necessarily only public funds, but also private funds.”

Thiaw added: “Not only public funds, but also private funds. The private sector must invest to sustain productivity, while harmful taxpayer-funded subsidies should be redirected toward environmentally friendly and land-friendly activities.”

Collaboration with Saudi Arabia

To address these pressing challenges, Thiaw expressed the UNCCD’s eagerness to collaborate with Saudi Arabia in integrating advanced technologies with traditional practices.

“Our ambition is to help countries transition effectively, and Saudi Arabia is uniquely positioned to lead this effort,” Thiaw said, highlighting the Kingdom’s capacity, energy, and financial resources.

He added: “Now, there is a lot of discussion at the moment under the climate negotiations to see whether we can have net zero in terms of emissions. But if you are to achieve net zero in terms of emissions, it is not only emissions coming from industry, but emissions coming from land use, because land use is the second-largest emitter.”

Thiaw emphasized that degrading land increases carbon emissions, whereas restoring land acts as a natural solution by capturing carbon and returning it to the soil, thus helping to mitigate climate change.

The progress showcased at the Saudi pavilion highlights how merging traditional practices with advanced technologies can pave the way for sustainable energy transitions, better land and water management, and long-term environmental and economic stability. This model serves as a benchmark for addressing resource challenges in arid regions and other vulnerable areas globally.


Foreign reserves propel Saudi assets to $435bn

Updated 31 min 53 sec ago
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Foreign reserves propel Saudi assets to $435bn

RIYADH: Saudi Arabia’s official reserve assets saw a 2.22 percent year-on-year increase to SR1.63 trillion ($435.41 billion) in October, underscoring the Kingdom’s fiscal resilience.

Data from the Saudi Central Bank, also known as SAMA, revealed that these holdings include monetary gold, special drawing rights, the International Monetary Fund’s reserve position, and foreign reserves. 

The latter category comprises currency and deposits abroad as well as investments in foreign securities, and accounted for 94.34 percent of the total, reaching SR1.54 trillion in October – an annual rise of 2.32 percent.

Special drawing rights rose to SR78.42 billion, marking a 2.09 percent increase and accounting for 4.8 percent of Saudi Arabia’s total reserves. 

Created by the IMF to supplement member countries’ official reserves, SDRs derive their value from a basket of major currencies, including the US dollar, euro, Chinese yuan, Japanese yen, and British pound sterling. SDRs can be exchanged among governments for freely usable currencies when needed. 

In addition to providing supplementary liquidity, SDRs help stabilize exchange rates, act as a unit of account, and facilitate international trade and financial stability. 

The IMF reserve position totaled around SR12.41 billion but recorded an 8.03 percent decline during this period. This category represents the amount a country can draw from the IMF without conditions. 

Gold reserves remained steady at SR1.62 billion, a level unchanged since February 2008. 

Saudi Arabia’s reserve assets, underpinned by substantial foreign exchange reserves and sovereign wealth managed through entities like the Public Investment Fund, serve as a cornerstone of the Kingdom’s fiscal strength. 

These reserves provide the government with a robust financial buffer to navigate economic uncertainties, including fluctuating oil revenues, global financial market turbulence, and geopolitical risks. 

With significant reserve levels, the Kingdom is well-positioned to meet its financing requirements across short, medium, and long-term horizons. 

This financial resilience bolsters Saudi Arabia’s ability to secure favorable borrowing terms from both domestic and international markets, enhancing investor confidence and supporting fiscal sustainability. 

The strategic deployment of these assets aligns with Saudi Arabia’s Vision 2030, which focuses on economic diversification, enhancing non-oil sectors, and ensuring sustainable long-term growth. 

This comprehensive strategy equips the Kingdom to mitigate risks while fostering stability and pursuing its ambitious economic objectives.


Pakistan stocks smash 113,000 mark on strong performance by energy, fertilizer sectors

Updated 47 min 50 sec ago
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Pakistan stocks smash 113,000 mark on strong performance by energy, fertilizer sectors

  • KSE-100 index climbed 2784.61, or 2.51 percent, to stand at 113,594.82 points at 2:48pm
  • Investors confident of significant interest rate cut at next monetary policy meeting on Dec. 16

ISLAMABAD: Pakistani stocks continued their record-breaking streak on Thursday, crossing the 113,000-point mark for the first time during intra-day trading, with the strong performance of energy and fertilizer shares contributing to the gains. 

The benchmark KSE-100 index climbed 2784.61, or 2.51 percent, to stand at 113,594.82 points at 2:48 pm, from the previous close of 110,810.21 points. 

“Lower T-Bill yields, leading up to next week’s monetary policy, are driving investor enthusiasm,” Head of Equities at Intermarket Securities Raza Jafri told Arab News. “Index heavyweight energy and fertilizer contribute most to today’s rise.”

Arif Habib Corporation Chief Executive Officer Ahsan Mehanti attributed the record-breaking streak to surging global crude oil prices, upbeat Pakistan Oil Fields sales, car sales, cement dispatches data for November 2024 and the Asian Development Bank raising the growth forecast to three percent for FY25.

“These factors played the role of a catalyst in the record surge,” he told Arab News. “Stocks showed record bullish activity after government bonds yields fell by up to 100bps in the State Bank of Pakistan auction expected to bring significant policy easing next week.”

Stocks have been performing well this week on the back of investor confidence of a significant interest rate cut by the central bank at the next monetary policy meeting on Dec. 16.

Pakistan’s central bank has already slashed interest rates by 700 basis points (bps) in four consecutive meetings since June, bringing it to 15 percent.

According to a poll by Topline Securities, 71 percent of participants expect the central bank to announce a minimum rate cut of 200bps next week. 

Pakistan’s annual consumer inflation also slowed to 4.9 percent in November, lower than the government’s forecast and the lowest in nearly six years. This is down from 38 percent last year.

Trade data released by the Pakistan Bureau of Statistics also supports positive investor sentiment as the trade deficit narrowed by 7.39 percent during the first five months (July-November) of the current fiscal year, standing at $8.651 billion, compared to $9.341 billion during the same period last year.

Exports rose by 12.57 percent to hit $13.69 billion, while imports increased by 3.90 percent to $22.342 billion during this period. November’s trade deficit narrowed even further, dropping by 18.60 percent year-on-year to $1.589 billion compared to $1.952 billion in November 2023.


IEA predicts global oil market will remain well-supplied in 2025

Updated 12 December 2024
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IEA predicts global oil market will remain well-supplied in 2025

RIYADH: The global oil market is expected to be adequately supplied in 2025, even as OPEC+ extends its voluntary production cuts by an additional three months, according to the International Energy Agency.

In its latest report, the IEA raised its global oil demand growth forecast for 2025 to 1.1 million barrels per day, up from its previous estimate of 990,000 bpd. This upward revision is driven by rising oil demand in Asian markets.

The report comes just a day after OPEC revised its own global oil demand growth projection for 2025, cutting it to 1.4 million bpd. According to the oil producers’ group, total global oil demand is expected to reach 105.3 million bpd in 2025, an increase from 103.8 million bpd in 2024.

The IEA noted that OPEC+ decision to extend its voluntary production cuts for another three months and push back the ramp-up period by nine months, now extending to September 2026, has significantly reduced the potential supply surplus that was anticipated for next year.

However, the IEA cautioned that persistent overproduction from some OPEC+ members, strong supply growth from non-OPEC+ countries, and relatively modest global oil demand growth would still result in a comfortably supplied market in 2025.

Global oil consumption is projected to reach 103.9 million bpd in 2025, closely aligned with OPEC+ forecast.

The IEA also highlighted that oil demand growth next year would be largely driven by petrochemical feedstocks, while demand for transport fuels remains constrained by behavioral changes and advancements in technology.

The report also indicated that crude oil production from OPEC could increase next year if countries such as Libya, South Sudan, and Sudan can maintain their production levels, along with the expansion of Kazakhstan’s Tengiz field.

On the global supply side, non-OPEC+ countries are expected to contribute the majority of production growth, with the US, Brazil, Canada, Guyana, and Argentina collectively adding over 1.1 million bpd.

Additionally, the IEA forecasted that Saudi Arabia’s oil supply would receive a boost in 2025 from the start-up of Saudi Aramco’s Jafurah gas project, which will increase the Kingdom’s natural gas liquid supply.

In June, Aramco finalized $25 billion worth of agreements for the second phase of its Jafurah gas field development and the third phase of its master gas system expansion.

These infrastructure upgrades are expected to increase the network’s capacity by 3.15 billion standard cubic feet per day.

 


Qatar records budget surplus of $27.43m in Q3, finance ministry says

Updated 12 December 2024
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Qatar records budget surplus of $27.43m in Q3, finance ministry says

CAIRO: Qatar recorded a budget surplus of 100 million Qatari riyals ($27.43 million) in the third quarter of 2024, the finance ministry said on Wednesday.

Qatar's total revenues registered around 51.3 billion riyals in the same quarter.