Egypt to issue Chinese yuan bonds
Egypt has decided to issue bonds denominated in the Chinese currency, the yuan. Egyptian Finance Minister Mohamed Maait said during a press conference today that Egypt will issue $1.5 billion and $2 billion worth of yuan-denominated bonds, several Arabic-language media reported.
What this means: Bonds are financial security that represents a government’s obligation to repay bond buyers. The government generally uses bonds to help finance expenditures. In this case, Egypt will issue bonds with a monetary value denominated in yuan, as opposed to Egyptian pounds or US dollars.
Why is this important: The US dollar is the world’s reserve currency and is widely used in the Middle East, including for bond issues. However, as China grows as an economic powerhouse, the yuan is reducing the dominance of the dollar, at least to a small extent. In April, the central bank of Israel added the yuan to its foreign currency reserves. Saudi Arabia has also considered using the yuan instead of the dollar for oil sales to China. Iran also announced this month that it had started using Russian rials and rubles for trade with Russia.
Bonds also have significance with regard to Egypt’s economic situation. Egypt’s foreign exchange reserves have fallen dramatically this summer, in part due to fallout from the Russian invasion of Ukraine. The war disrupted Egyptian imports, especially of wheat.
The Egyptian government is currently working to reduce its budget deficit accordingly. The Ministry of Finance also announced today its intention to issue bonds denominated in Egyptian pounds worth $600 millionaccording to local media.
Yuan bonds have been in the works for some time. Maait announced plans to issue yuan bonds in May alongside the Chinese ambassador in Cairo.
Know more: Egypt’s ally, the United Arab Emirates (UAE), began issuing bonds for the first time last year, opting to use US dollars. This year, the UAE started issuing bonds in its own currency, the dirham.