CIB’s London-listed CDs signal expected EGP devaluation

Newsletter

18 Apr 2023

CIB’s London-listed CDs signal expected EGP devaluation. The London-listed securities of Commercial International Bank (CIB) are indicating expectations of another devaluation of the Egyptian pound. CIB’s listed certificates of deposit (CDs) on the London Stock Exchange are trading at a 31% discount to their shares on the Egyptian Exchange (EGX), marking the largest difference since August 2016. Earlier this month, Goldman Sachs reportedly said that financing options for Egypt have become limited in light of the difficulty in accessing the capital markets, as the Gulf governments prefer direct investment over lending, in addition to the International Monetary Fund’s (IMF) reluctance to provide more financing to Egypt. (Bloomberg)

Egypt’s USD-denominated bonds, including the benchmark issue due to mature in 2025, fell more than 2.2 cents in trading last week.
The Egyptian pound is falling further in the derivatives markets. Twelve-month non-deliverable forwards last week have the EGP hitting 41.60 to the USD, up from EGP 41.00 the week earlier. Meanwhile, the USD is currently trading at 35.40 in the parallel market. The official rate has remained at 30.96 for more than a month. The unwillingness to move to a fully flexible currency means another chunky devaluation is coming. (Reuters, Bloomberg & Al Arabiya)
Egypt needs a mix of monetary, financial policies to restore economic stability: IMF chief.
Adjusting the exchange rate of the Egyptian pound is a key factor to achieve economic stability in the country, as it allows the central bank to implement favorable monetary policies to local conditions. The Central Bank of Egypt (CBE) have to reach the inflation target in one way or another, noting that there are still more steps required to achieve this. Egypt received more than one external and internal shock, foremost of which was the increase in global commodity prices, particularly food, and whilst country’s tourism sector did not rebound as expected. (Al Mal)
On April 11th, the IMF cut its forecast for Egypt’s real gross domestic product (GDP) for the current fiscal year (FY) 2022/2023 to 3.7% from its previous projection of 4%.
The country’s real GDP growth for the upcoming FY 2023/2024 is projected to reach 5%, down from a previous forecast of 5.3%. The IMF also expected Egypt’s inflation would hit 21.6% in 2023 before dropping to 18% next year. As per the global economic growth, the IMF expects it to hit 2.8% this year before rising to 3% in 2024. (World Economic Outlook (WEO) report)
Gross debt to reach 92.9% of GDP in 2023, IMF projects.
Egypt's general government gross debt is projected to reach 92.9% of GDP in 2023. This would be the highest ratio since 2018, when it stood at 87.9%. The IMF expects the ratio to decline to 87% in 2024 and 78% in 2028. The report projected Egypt's general government overall balance to widen in 2023 to 7.6% of GDP, up from 5.8% in 2022, before reaching 9.2% in 2024. However, the ratio is expected to gradually decline thereafter, reaching 5% in 2028. (Ahram Online)
Egypt to launch e-platform for establishing firms online next July.
The General Authority for Investment and Free Zones (GAFI) will launch a digital platform that enable investors to establish their companies online on July 1st. The government targets resolving 80% of investors' problems by next June. Egypt enjoys great investment opportunities in the sectors of health, education, automotive, pharmaceutical, logistics, communications, and information technology. (Arab Finance)
The Supply Ministry has inked an agreement with CIB and Visa to develop the country’s first digital business registry.
The registry will provide every business operating in Egypt with a unique QR code and digital identification card that companies can use to access government services and make payments and ATM withdrawals. (Zawya)
UAE President Sheikh Mohammed bin Zayed Al Nahyan arrived in Cairo last wednesday for talks with President Abdel Fattah El Sisi.
We are seeking to secure FDI promised by the UAE and Saudi Arabia to help shore up our economy amid global volatility. Gulf investors have signaled their intent to channel capital into state-owned assets through the Madbouly government’s privatization program, but most of the c. 20 billion USD in pledged investment is yet to materialize amid reports that talks over some sales have stalled. El Sisi flew to Jeddah last week to take suhoor with Saudi Crown Prince Mohammed bin Salman. (Reuters)
The European Bank for Reconstruction and Development (EBRD) will invest some USD 20 mn in Tanmiya Capital Ventures Fund II,
a second mid-cap fund from private equity firm Tanmiya Capital Ventures (TCV) that the EBRD says will be worth 150 million USD in total. This is the first we’re hearing of TCV’s second fund. The PE firm reportedly said last month that it will spend 30 million USD to add two unnamed food companies to its portfolio this year, using finance from existing shareholders. Its current portfolio contains Abu Auf, Hassan Allam Utilities, Mifad, Plant Form and Tamweel Holding. (Hapi Journal)
Fawry has topped Forbes' 2023 list of top 30 fintech companies in the Middle East, with a transaction volume of 6.8 billion USD last year and 49.4 million customers.
More Egyptian companies making the cut than firms from any other single country with eight entries. Among the Egyptian fintech firms on the list is MNT-Halan, which recently secured over 200 million USD from Abu Dhabi-based Chimera Investments. (Hapi Journal)
El Sewedy Electric consortium awarded EUR800mn power plant in Zliten.
A consortium of El Sewedy Electric and Qatar’s Urbacon Trading and Contracting signed a contract with General Electricity Company of Libya (GECOL) for the construction of a new gas-fired 1,044MW power plant in Zliten. The project, which has an investment cost of EUR800mn, is expected to reach trial operations by the end of 2024, with commercial operations coming in 2025. It is worth noting that construction will be implemented in cooperation Siemens. (Al Mal)
Egyptian deeptech startup Visual and AI Solutions (VAIS) combines geospatial intelligence with AI to inform efficient agricultural practices using proprietary technology.
The startup invented patent-pending Virtual Field Probing (VFP) technology to offer AI solutions for optimizing the use of irrigation water and mitigating the impacts of climate change. VAIS solutions also include dynamic crop mapping, nutrient distribution mapping and fertilization plans, monitoring and detection of crop diseases, and early warning systems to protect against weather incidents. (WAYA)