Egypt has the highest real interest rate in the world among more than 50 major economies
For our top macro talks, we believe that the Central Bank’s tendency to fix interest rates during next Thursday’s meeting is driven by maintaining the return rates on the pound as a factor that attracts foreign investments in local portfolios compared to other emerging markets, in addition to the absence of an inflationary wave that pushes it to raise interest rate. Securities in emerging markets attracted about 4.2 billion USD in August 2021. Over the past month, emerging markets have emphasized that valuations will overreact to diminishing discussions by the Federal Reserve, which could affect the markets’ ability to attract foreign investment.
- Moreover, Egypt has the highest real interest rate in the world among more than 50 major economies. They subsequently pumped billions of dollars into the local debt market.
We believe Egypt’s reliance on borrowing has left it with a crippling debt-service burden that’s one of the heaviest among all sovereigns. The Egyptian economy needs to get more funding from equity sources if the country is to weather a potential increase in global interest rates. However, from the bright side, Egypt has repaid a total of 2 billion USD in external debt to international and Gulf banks by the end of August 2021.
- Agricultural Bank of Egypt (ABE) announced offering new facilities to the beneficiaries of “Bab Rizq” microfinance program.
The step is part of the CBE’s initiative to promote financial inclusion for farmers. The bank will waive the first repayment instalment with a maximum of 500 EGP for individuals wishing to obtain microfinance on September 10th-30th. Bab Rizq is one of the most important microfinance programs at ABE which targets women and small traders and craftsmen in Egyptian villages. It also targets low-income groups to empower them economically.
- And regarding Egypt- African political economic relations, Africa Finance Corporation (AFC) has welcomed Egypt as its newest member state, becoming the 32nd member state.
As a member, Egypt will enjoy benefits including increased investment allocation, preferred access to AFC’s structuring and lending solutions, reduced debt costs for projects, and access to advisory and project development services. Here, it is worthy to highlight that AFC is the second-highest investment multilateral financial institution in Africa.
- Equally important, Egypt’s banking sector witnessed around 1 billion electronic transactions worth 2.8 trillion EGP during the fiscal year 2020/2021 compared to 1.9 trillion EGP in 2019/2020. Obviously, the banking sector is witnessing a major boom in terms of electronic transactions.
Also, the Internet banking transfers hiked 70% to 1.4 trillion EGP in 2020/2021, compared to 825 billion EGP in 2019/2020.
- Moving to Egypt’s energy sector, first, Egyptian companies sign contracts to build two billion dollars of power stations in Libya.
Egyptian companies are expected to acquire between 60% and 70% of the reconstruction projects in Libya. It is worth mentioning that the cost of the work needed to rebuild Libya is estimated at 111 billion USD and is being implemented over 10 years, and that the plan is still stalled until the budget is approved and political consensus is achieved among all parties.
- Second, the Emirati company Al Nowais, which works in the field of renewable energy, plans to sell the license of its projects to produce electricity from solar energy in Benban to about 10 companies operating in the Egyptian market, including Infiniti and ACWA Power.
Through the sale of solar energy, Al Nowais aims to provide the necessary liquidity to implement a package of other projects, and is currently negotiating with the ten companies on the cost of the capacity to be sold.
- By the same token, the Saudi Programming Group adopts an ambitious strategy, through which it aims to enhance the volume of its investments in the Egyptian market and transform Egypt into a pivotal center in the Middle East and Africa to export technical services with local expertise to various markets around the world
through the establishment of a smart village that includes an operations center for information security solutions, a data center and another for outsourcing business services. Programming is currently developing a digital wallet for the company, ditigal wallet, in addition to a transportation application similar to the “Uber” and “Careem” applications.
- Moving to our investments talks, first, The European Bank for Reconstruction and Development (EBRD) announced considering directing a sovereign loan worth 250 million EUR to Egypt’s government as a fund to modernize and rehabilitate Cairo’s Metro line 2.
Through the new Green Economy Transition (GET) approach, the EBRD will increase green financing to more than 50% of its annual business amount by 2025, with the key aim to reduce net annual greenhouse gas emission by at least 25 million tons over the course of the next five years.
- Finally, for Egypt’s COVID watch, Egypt’s Health Ministry is in talks with US pharma giant Moderna to manufacture its mRNA COVID vaccine locally.
However, the first batch of Moderna vaccines is expected to be arrived any day, while some 3.2 million doses of the Pfizer shot are set to arrive on September 16th. Additionally, the government could secure an agreement with one European or Western pharma company to produce vaccines in Egypt before the end of 2021.
Stay up to date
More Newsletter to Check
SUBSCRIBE TO NEWSLETTER
Subscribe to download our daily economics and business roundup
×
![]()