Egypt holds roughly 0.6% in the GBI-EM Global Diversified Index as of December 26 2023, with 13 EGP-denominated bonds included in the index with maturity dates stretching from 2024 to 2030
While news of JPMorgan’s decision to exclude Egypt from its emerging markets bond indices has heightened conversations on the growing pressure on the economy as it continues to combat a foreign currency shortage, local experts dispute the actual impact on the economy.
Egypt holds roughly 0.6% in the GBI-EM Global Diversified Index as of December 26, 2023, with 13 EGP-denominated bonds included in the index with maturity dates stretching from 2024 to 2030.
The firm’s Government Bond Index-Emerging Markets (GBI-EM) tracks the performance of local currency debt issued by emerging market governments, whose debt is accessible by most of the international investor base. Egypt will also be removed from JP’s Local Market Index (ELMI+) on March 29.
“This will limit the recovery in portfolio inflow going forward, even after any further pound devaluation or expansion of the IMF program,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC to Bloomberg. “It will increase the external funding challenges, even though the government is looking to increase FDI inflows to boost capital inflows.”
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Local experts have a less negative view of the expulsion; experts speaking to local media have shared that the impact is expected to be minimal due to weak inflows as foreign investors rarely invested in Egyptian treasury bills or bonds during recent times.
Speaking to Ashraq Business, Cairo Capital’s chief economist stated that funds from the index were negligible due to Egypt’s weak weight on the index.
This is not the first time Egypt was included and subsequently excused from the index. The North African country was relisted on January 31, 2022, after a decade-long break from the GBI-EM index.
In an official release, JPMorgan stated, "Egypt has been under index surveillance since September 21, 2023, due to issues related to reported difficulties in essential foreign currency convertibility by concerned investors.”
JPMorgan’s decision comes only a day after Egypt’s finance and international cooperation ministers met with the International Monetary Fund’s head to resume discussions on the country’s $3 billion loan.
