This is PART 1 of a two-part series by Isabel Esterman on government securities: treasury bonds and bills, and other debt instruments sold by a government (including Egypt) to finance its borrowings. 

In the last two years the Egyptian government has been leaning more heavily on domestic banks in an attempt to narrow its deficit and fund its borrowing needs.

Borrowing money from lenders is pretty much like an individual borrowing money from a bank: the bank evaluates your credit history, you borrow X dollars and pay Y% interest. This makes it relatively easy to have critically important public conversations about whether taking on a loan is a good idea.

Bond issuances aren’t actually that much more complicated, but the process is usually obscured by specialised jargon — YTM, coupons, issuances, securities, t-bills. People’s eyes glaze over, and transactions involving billions of dollars of public funds get shunted off to the financial pages.

Instead of headlines like “Government borrows LE6 billion at 14.77%” we see “CBE offers 6 billion in t-bills; average yield climbs to 14.77%”.

What is more, we often conflate government borrowing via treasury bond and bills (a key element of fiscal policy) with the secondary market for bonds (buying and selling government debt), which is a specialized, complicated financial tool where bonds are traded between investors.

Confusing the two is a problem because it means that people who aren’t bond traders (most of us) also aren’t kept well informed about how much money the government is borrowing.

The below is an introduction to government bonds and their purpose. We will explain more about what this means for Egypt in Part 2, coming tomorrow. 


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