Egypt’s headline urban inflation rose slightly to 5.7% in August, up from 5.4% in July 2021
For our top macro talks, on the one side, Egypt’s headline urban inflation rose slightly to 5.7% in August, up from 5.4% in July 2021, on the back of rising food prices and transportation costs. Here, it is noteworthy that it is the highest headline inflation rate recorded since November 2020. This inflation rate will surely weigh in on the Central Bank’s Monetary Policy Committee meeting on Thursday, 16 September. However, inflation is still within the CBE’s target range of 7% (±2%) on average during the fourth quarter of 2022. We believe Egypt has some of the highest real interest rates in the world, which have helped to attract investment in treasuries but discouraged corporate borrowing.
- On the other global side, Egypt’s finance minister voiced confidence in his country’s ability to cope if the U.S. Federal Reserve start tapering its pandemic stimulus, which is a risk because that may undercut Egypt’s appeal among investors.
Here, it is worth remembering that Egypt’s authorities have plenty of recent experience in crisis management, after a crippling dollar shortage prompted a currency devaluation and sweeping reforms in 2016 that were backed by a 12 billion USD International Monetary Fund program. That was followed by another loan to help cope with the pandemic.
- 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.
- With this in mind, Cement prices witnessed an increase of 100 pounds per ton last Friday packed to the consumer, bringing the price of selling a ton of cement to the consumer between 960 EGP per ton to 1060 EGP per ton, compared to 950 to 1060 EGP.
Here, it is important to mention that the cement companies operating in the local market intend to make agreed and gradual increases that will continue throughout the month of September.
- Moving to Egypt’s renewable energy sector, Sweden's ambassador expressed his country's desire to increase the volume of cooperation with Egypt, represented in the electricity and renewable energy sector.
We think that there are plenty of financing institutions who are ready and eager to provide the necessary funds for Egypt’s renewable energy projects, as well as the willingness of companies working in this field to cooperate with the Egyptian electricity sector, according to the latest technologies that suit its current and future needs.
- By the same token, Egypt’s Ministry of Planning and Economic Development stated that the targeted investments for the transport sector in the 2021-2022 plan amount to 244.7 billion EGP, as transport networks are the arteries of economic life,
on which economic and social development plans and programs are built. Adding, the total investments targeted for the transport sector in the 2021-2022 plan amount to 244.7 billion EGP, achieving an investment boom with a growth rate of 104%, which is more than double the investment expected in 2020-2021.
- Moving to our investments talks, first, Global Pioneer invests 1 billion EGP to establish a commercial center in the New Administrative Capital (NAC) which will be the first project to be operated.
Pioneer Plaza has also attracted a group of major international companies wishing to open headquarters in Egypt; The company confirmed that nearly 50% of the mall was sold outside Egypt. It is worthy to mention as well that the mall is designed as the first energy-saving building, and all the principles of sustainability were applied to it in the construction process.
- Second, MNT-Halan has raised about 120 million USD from a group of global and regional investors, including Apis Growth Fund II, Development Partners International (DPI), and Lorax Capital Partners.
This This funding endorses its strategy to drive further innovation in its technology, product development, scale to tens of millions of customers, and expand cross-border.
- And finally, for Egypt’s real estate sector, Misr Italia Properties signed contracts worth EGP 700 million to accelerate the construction work of its projects in the New Administrative Capital (NAC).
Additionally, contracts worth EGP 200 million were signed with three construction firms to accelerate the construction of six buildings that form part of the first phase of the EGP 9-billion- Vinci New Capital.
- Furthermore, A banking consortium led by Export Development Bank of Egypt (EDBE) (EXPA) has signed a long-term financing agreement worth 1.5 billion EGP in favour of Arkan Palm for Real Estate Investment Company.
EDBE takes part in the financing with a sum of 650 million EGP, HDBK participated with a sum of 300 million EGP, and United Bank contributes to the loan with 250 million EGP. Meanwhile, Suez Canal Bank and MIDBANK contribute to the loan 150 million EGP each. Arkan Palm will use this loan to partially finance the investment cost of the first phase of its 205 projects in Sheikh Zayed.
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