Cairo: Egypt selected four European banks to manage its first euro-denominated bond sale, taking advantage of lower borrowing costs in Europe as it looks to secure funding to plug the budget deficit.

The government picked BNP Paribas, Deutsche Bank, Standard Chartered and Intesa Sanpaolo for the issuance worth between 1 billion and 1.5 billion euros (Dh4.5 billion to Dh6.8 billion) that’s slated to be held before the start of the fiscal year that begins July 1, Khaled Abd Al Rahman, assistant finance minister for capital market operations, said by phone. Al Tamimi & Co. and Dechert LLP are the legal advisers.

The planned sale comes after the government last month raised $4 billion (Dh14.69 billion) from international debt markets to finance the budget deficit and bolster foreign reserves. The government, which has been struggling to draw in longer term investments, is counting on such sales to help plug a budget deficit projected to narrow to around 8.5 per cent of gross domestic product in fiscal 2018-19.

The government plans to issue $3 billion-$5 billion in international bonds in fiscal 2018-2019, Finance Minister Amr Al Garhy said in a telephone interview.

Before the planned euro-denominated bond sale, Egypt had raised $11 billion through international bonds since the November 2016 decision to float the currency. That step, coupled with fuel subsidy cuts, helped to finalise a $12 billion International Monetary Fund loan that was key in boosting investor confidence in an economy that had struggled to recover since the 2011 uprising that ousted President Hosni Mubarak.

While yields on local treasury bills have been dropping since mid-2017, they remain around 17 per cent even after the central bank cut the benchmark interest rate by 100 basis points last month. The government has been eager to secure cheaper financing at a time when debt servicing costs account for around a third of the budget.

Foreign reserves surged to a record $42.5 billion in February, climbing $4.3 billion in part as a result of the recent dollar-denominated bond sale.

— Bloomberg