Egypt studies new bond trading system

Luxor: Egypt is working with Italian experts on a new system for trading bonds with the aim of expanding the market and slashing borrowing costs for the government.

Maged Shawky, the chairman of the Cairo and Alexandria Stock Exchanges, said he met experts from the Italian stock exchange in Milan to discuss the issue.

"They will give us a proposal for the new bonds trading system during April," he said.

The new system should stimulate trading in government bonds, especially between institutions, he added. He said he could give no further details of the proposals at this stage.

At the end of 2007 outstanding Egyptian government bonds were worth 67.6 billion Egyptian pounds ($12.4 billion) and Egyptian corporate bonds were worth 5.1 billion pounds.

Egypt's fiscal deficit is a major problem for the Egyptian economy, averaging 8.4 per cent of GDP since 2003-04, with fiscal 2006-07 closing at a deficit of 7.7 per cent of GDP.

High government expenditure is a legacy of the government's need to provide a social safety net to its citizens, with GDP per capita and social indicators lower than those of peers, according to a report by Standard and Poor's in November.

"The new system will bring more transparency to the market, helping decrease the borrowing costs for the government and also will boost corporate bonds activity," Shawky said.

The stock exchange chairman said government efforts to boost trading in stocks are paying off.

"Last week we had an average of 80,000 operations a day with the average daily volume jumping to three billion pounds, as about 80 per cent of companies are traded monthly," he said.