As Zilla Capital expected, CBE kept the interest rates during last Thursday’s MPC meeting unchanged on the back of a minor decrease in April’s inflation figures

Newsletter

21 May 2023

As Zilla Capital expected, The Central Bank of Egypt (CBE) kept the interest rates during last Thursday’s MPC meeting unchanged on the back of a minor decrease in April’s inflation figures. The CBE has raised interest rates by 1000 bps over the past year after delivering a jumbo 200-bps rate hike in March. The CBE Governor Hassan Abdalla last month expressed doubts on the effectiveness of monetary policy to curb inflation, and said that policymakers need to be “very careful” about tightening policy further. (Zilla Capital)

Egypt engages in discussions with a German company to explore strategies for reducing dependence on single-use plastic bags.
Egypt's Environment Minister is engaging in discussions with a prominent German company to tackle Egypt's reliance on single-use plastic bags. The minister acknowledges the urgency of addressing plastic waste and emphasizes the need for sustainable alternatives. The collaboration aims to identify effective measures to reduce the country's dependence on non-recyclable bags. The excessive use of these bags has resulted in significant plastic waste accumulation, posing threats to Egypt's ecosystems and natural resources. Strategies being considered include promoting reusable bags, developing biodegradable alternatives, and encouraging consumer behavior changes. This joint effort demonstrates a commitment to sustainability and combating plastic pollution. By reducing reliance on single-use plastic bags, Egypt aims to minimize the environmental impact associated with their production and disposal. The discussions mark a significant step towards a sustainable future, seeking practical solutions to decrease dependency on these bags and preserve Egypt's environment for future generations. The proactive approach, supported by the expertise of the German company, holds promise in addressing the plastic waste crisis and setting an example for other nations. (Al Ahram)
Egypt and ACWA Power discusses New FDI Inflows to Egypt.
Egypt's Minister of International Cooperation, Rania Al-Mashat, held discussions with ACWA Power to explore opportunities for expanding the company's investments in Egypt. The talks focused on ACWA Power's ongoing projects in renewable energy and water desalination, highlighting Egypt's commitment to attracting foreign investments and promoting sustainable development. ACWA Power expressed appreciation for Egypt's support and showed interest in further contributing to the country's economic growth. The discussions also touched upon potential collaborations in sectors like manufacturing and technology transfer. The meeting reflects a mutual desire to strengthen economic cooperation and leverage ACWA Power's expertise for Egypt's sustainable development. (Egypt Independent)
Egypt Repays USD 3.5 bn in foreign debt in Q1 2023.
Egypt's Ministry of Finance has announced the successful repayment of $3.5 billion in international bond obligations during the first quarter. Minister of Finance, Mohamed Maait, emphasized the significance of meeting financial commitments promptly, reflecting Egypt's strong fiscal position and the trust of international investors. The timely repayment of the bonds demonstrates Egypt's commitment to maintaining financial stability and credibility in the global market. This achievement highlights Egypt's efforts to attract foreign investments and sustain positive economic growth. It showcases the country's dedication to creating a favorable investment environment and fostering investor confidence. By fulfilling its financial obligations, Egypt aims to strengthen its position as an attractive destination for international investors and promote sustainable development. The repayment of the international bonds is a positive indicator for Egypt's economy, signaling its ability to manage debt obligations effectively. It also underscores the government's commitment to prudent fiscal policies and responsible financial management. (Bloomberg Alsharq)
Egypt expects record-breaking revenues from tourism and a stable Egyptian pound by the end of the year.
Egypt is anticipating a significant boost in its tourism sector with expectations of record-breaking revenues by the end of the year. The Minister of Tourism and Antiquities, expressed confidence in the sector's recovery, attributing it to the successful management of the COVID-19 pandemic and the implementation of effective safety measures. The government's efforts to enhance tourism infrastructure and diversify destinations are also expected to contribute to the positive outlook. In addition to the optimistic tourism forecast, Egypt's Minister of Finance, Mohamed Maait, emphasized the stability of the Egyptian pound. He highlighted the currency's positive performance against major foreign currencies and attributed this stability to the government's prudent economic policies, including fiscal discipline and structural reforms. The stable currency not only instills confidence in the economy but also facilitates foreign investment and trade. The combination of a thriving tourism sector and a stable currency is expected to bolster Egypt's economic resilience and attractiveness for international investors. It demonstrates the country's commitment to sustainable economic growth and development. (Blooberg Alsharq)
Egyptian Prime Minister Mostafa Madbouly said that estimations of the hard currency are overstated and that the Egyptian pound is undervalued.
The Prime Minister said that the state-run projects’ aim was to create job opportunities and not to compete with the private sector, adding that agreements with the World Bank and the International Finance Corporation (IFC) were finalized to boost investments in Egypt. Madbouly highlighted that industrial investors have been granted a grace period of not more than two years to their projects in the country, with the extension of operation license to five years, instead of one year. Investors have not faced any issues while transferring cash, as the government allowed $21 billion in outflows so far, Madbouly stressed. (CNBC Arabia)
Fitch Ratings has recently downgraded the Long-Term Issuer Default Ratings (IDRs) of four Egyptian banks, namely the National Bank of Egypt (NBE), Banque Misr, Banque Du Caire, and Commercial International Bank Egypt (CIB) from 'B+' to 'B'.
The rating agency also revised their Viability Ratings (VRs) from 'b+' to 'b' and Government Support Ratings (GSRs) from 'b' to 'b-' in a rating action commentary released on May 17th. These downgrades primarily reflect the increased risks associated with external financing requirements. The downgrades also indicate a diminished ability of the sovereign to provide support, particularly in foreign currency, resulting in the cap of the domestic systemically important bank (D-SIB) GSR for Egyptian banks at 'b-'. Fitch expects that the banks' core capital ratios may face some pressure in 2023 due to potential currency depreciation and losses from mark-to-market (MTM) adjustments. Additionally, the agency estimates that certificates of deposit (CDs) will comprise over half of the total reported deposits at NBE and Banque Misr. The outlook for all the aforementioned banks remains negative. (Fitch Ratings)
CBE appoints Barclays as international financial adviser for divestment of United Bank.
The Central Bank of Egypt (CBE) has appointed Barclays Bank PLC as an international adviser, alongside CI Capital Investment Banking as the local financial adviser, to divest its stake in the United Bank of Egypt, according to a press release on May 17th. On March 9th, it was reported that the CBE requested investment banks to offer advisory proposals for the sale of United Bank of Egypt. (Arab Finance)
Infinity Power and Copelouzos Group have formed a partnership to collaboratively deliver renewable energy solutions for the GREGY project.
Copelouzos Group, through its arms Damco Energy and Elica Mediterranean Interconnection, have signed a memorandum of understanding (MoU) with Infinity Power, a joint venture between Masdar and Egypt’s Infinity, to jointly develop renewables projects that provide the Greece-Egypt electricity interconnection project (GREGY) with green energy sources, according to an emailed release on May 17th. The MoU covers the formation of a steering committee of three members to coordinate discussions, exchange information, and hold negotiations. Under the deal, the companies will exchange expertise as well as technical, commercial, and financial know-how to ensure rapid and successful implementation of renewables projects. (Arab Finance)
Egypt Signs Deal to manufacture atmospheric water generators
The Science and Technology Center of Excellence and Helwan Company for Metallic Appliances, affiliated with the Ministry of Military Production, have partnered with Japanese company MIZUHA Co. Ltd to jointly produce an atmospheric water generator. The device, named KuSui, is a water cooler that utilizes water vapor in the atmosphere to create drinking water. Manufactured at the ministry's affiliated factories, the device will be promoted in Egypt, as well as in Arab and African countries. This collaboration is part of a cooperation protocol between the ministry and the Japanese firm to test, evaluate, and manufacture the device. The innovative and sustainable zero-carbon technology aims to generate water in an efficient and environmentally friendly manner, according to Minister of Military Cooperation, Mohamed Salah El-Din. (Arab Finance)
CBE auctions T-bills worth EGP 39.5bn on Thursday May 18^th
on May 18th, the Central Bank of Egypt (CBE) conducted an auction for treasury bills (T-bills) with a total value of EGP 39.50 billion. The auction consisted of two tranches. The first tranche was worth EGP 16.50 billion and will reach maturity in 182 days on November 21, 2023, as per official data. The second tranche was valued at EGP 23 billion and has a tenor of 364 days, maturing on May 21, 2024. It's worth noting that the central bank had conducted a similar auction a week prior, offering T-bills with a total value of EGP 39.50 billion through two separate issuances. (Mubasher)
Egypt still falling short of Target for Car Import Initiative while still striving of foreign currency shortage.
Egypt, in its pursuit of increased dollar liquidity, has fallen short of its target for the initiative aimed at facilitating the import of cars for Egyptians living abroad, which concluded earlier this week. In November, the Egyptian Ministry of Finance introduced the "Import of Egyptian Cars Abroad" initiative. This program grants tax and fee exemptions for imported cars in exchange for a deposit in foreign currency at the Central Bank for a period of 5 years. The deposit is then redeemed in Egyptian pounds at the prevailing exchange rate upon maturity, with the aim of raising up to $2.5 billion. According to a government official interviewed by "Economy of the East," the initiative has yielded approximately $900 million, which is considered favorable given the challenging economic conditions. The official noted that extending the program's duration would not significantly impact the total amount collected. However, they also mentioned that the initiative's effect on customs revenues would be limited. Egypt has been grappling with a shortage of foreign currency since the Russian-Ukrainian crisis in February 2022. The rise in US interest rates in 2022 resulted in the withdrawal of over $22 billion in foreign investments, forcing Egypt to devalue its currency by about three times in a span of 15 months. The country also increased interest rates by 1,030 basis points during the same period to curb inflation rates, which had surpassed expectations. (Bloomberg Alsharq)
During the current year, eFinance is targeting entry into the Saudi market.
eFinance Investment Group, led by Ibrahim Sarhan, has unveiled its plans to enter the Saudi market this year in collaboration with the Saudi Public Investment Fund (PIF). The company aims to discuss investment opportunities with PIF representatives in February. PIF acquired 25% of eFinance's shares last year, making it a major shareholder in the group. The partnership aims to drive eFinance's growth and digitize the economy while expanding into African markets. Sarhan emphasized the importance of attracting dollar liquidity in the current circumstances. Although plans to enter Sudan, Libya, and Tunisia have been postponed due to the Russian-Ukrainian war, eFinance remains committed to providing digital solutions and automating government agencies in those countries. Additionally, eCards, a subsidiary of eFinance, signed an agreement to digitize healthcare services in Zimbabwe. The company plans to inject EGP 2 billion of investments in the current and upcoming years, focusing on human resources, talent acquisition, cloud computing, and technological infrastructure development. eFinance is actively seeking growth opportunities through business development, acquisitions, and integration with subsidiaries. (Bloomberg Elsharq)