The Monetary Policy Committee decided to raise the Central Bank of Egypt’s overnight deposit rate

Newsletter

22 May 2022

For Our Top Talks Today, The Monetary Policy Committee (MPC) decided to raise the Central Bank of Egypt’s (CBE) overnight deposit rate, overnight lending rate, and the rate of the main operation by 200 basis points to 11.25 percent, 12.25 percent, and 11.75 percent, respectively. The CBE’s decision comes in light with Fitch credit rating agency’s expectations that the central bank would raise interest rates at the Monetary Policy Committee’s meeting. The MPC decided that raising policy rates is necessary to contain inflationary pressures which is consistent with achieving price stability over the medium term. While Egypt’s annual consumer price inflation recorded 14.9 percent in April 2022, compared to 4.4 percent in the same month of 2021. As for urban inflation, it surged in April to 13.1 percent, reaching the highest level since May 2019, compared to 10.5 percent in March. The MPC Statement stated that this increase is attributed mainly to food items and further supported by non-food items. While both were affected by the depreciation in the Egyptian pound that occurred on the 21st of March 2022 and seasonal patterns, several other factors contributed to the increase in food prices; namely adverse weather conditions and high fertilizer prices that caused tomato and other prices to soar. Moreover, the statement mentioned that Egypt’s economy recorded a growth rate of 8.3 percent during the fourth quarter of 2021- prior to the Russian-Ukrainian crisis – to record the second highest real GDP growth rate since the third quarter of 2002. It is expected that economic activity in Egypt will continue to expand albeit at a slower-than previously projected pace, partially due to the unfavorable spillovers of international developments emanating from the Russian-Ukrainian war. The MPC decision today came slightly higher than our expectations to increase the interest rates between 100 and 150 points. (Egypt Today, Zilla Capital)

Secondly, Foreign Currency Deposits in Egyptian Banks have increased by 67% since the latest EGP devaluation while loan-to-deposit ratio has reached 48%, according to the Governor of the Central Bank of Egypt (CBE)
The EGP has devaluated by 18% since the CBE raised interest rates by 1% (100 basis points) in an extraordinary meeting last March, in an attempt to absorb the wave of inflation, and to attract foreign investments in USD for government debt instruments, after a drop in foreign currency liquidity in Egyptian Banks following the Russian-Ukrainian Crisis. The devaluation of the EGP, together with raising the interest rates, have contributed directly to an increase in the foreign currency deposits. The CBE Governor has also assured that the bank is taking the necessary measures to curb inflation rated that recorded 18% last April, the measures included increasing local natural gas production which curbed energy price inflation for both individuals and industrial consumers (Alsharq Bloomberg)
Thirdly, The Ministry of Communications and Information Technology launched on Wednesday the ‘Ashbal Misr Digital Initiative’ — a free grant that aims to refine IT skills for outstanding students.
The initiative aims to develop the technological skills of 3,000 outstanding students in cooperation with local and international specialized authorities in various technological sciences to cover scientific and educational aspects in addition to implementing activities to develop personal and leadership skills. The initiative will target students from Grade Seven all the way till Grade 11 in all schools across the country. Students may enroll in one of the specialized tracks according to their choice. These tracks include various fields such as digital arts, software development, securing networks and information, AI, and robotics, in addition to training them in personal and leadership skills such as communication arts, time management, teamwork, leadership and entrepreneurship, and sustainable development. (Al Ahram Daily)
To quickly diversify from Russian fossil fuels, the EU is investing up to €12 billion in pipelines and Liquified Natural Gas (LNG) terminals to improve access to gas and oil from other countries including Egypt,Israel and Nigeria.
The European Commission has given more details on how it plans to end Europe's dependence on Russian fossil fuels. Russia supplies 40% of the EU's natural gas and 27% of its imported oil. The EU sends the country roughly €400 billion a year in return. Now the EU plans to speed up its shift to green energy but says it must also invest in pipelines in other countries. It has been accused of helping fund the war in Ukraine through its use of Russian energy. The REPowerEU strategy was first announced in March with the stated aim of reducing Russian gas imports by two thirds in 2022. Rising energy costs have also put financial pressure on consumers and businesses in Europe now facing higher bills forcing Europe to move towards cheaper natural gas sources and creating opportunities to markets such as Egypt, Israel and Nigeria. (BBC)
Moreover, Emaar Misr for Development (EMFD) will support the Decent Life Foundation with EGP 1 billion to complete sustainable development projects for the most needy communities in Egypt, according to an emailed press release on May 19th.
This comes within the framework of the signed cooperation protocol between the two parties. The protocol aims to upgrade the economic, social, health, and educational levels of the most needy villages in the country in accordance with the Presidential initiative of Decent Life. The development projects are set to boost the efficiency of services across all sectors, including healthcare, social, and infrastructure, as well as to improve the urban environment and offer job opportunities. (Arab Finance)
Lafarge Egypt, a member of Holcim Group, has inked a long-term contract worth $93 million with Lumika Renewables Egypt, a subsidiary of AP Moller Egypt, to supply electricity through solar cells.
The two parties will collaborate to convert 50% of the factory’s daily energy consumption to clean energy, according to a recent press release. The partnership comes in line with Holcim's vision to promote the use of green renewable energy and reduce carbon footprint. Najib Ribi, Industrial Director at Lafarge and Member of Holcim, said: “[The contract] aims to supply Lafarge Egypt with approximately 140 GWh worth of electricity generated through solar cells per year." In 2021, Lafarge Egypt also introduced new products of EcoLabel with lower CO2 emissions and increased use of recycled materials. (Mubasher)
Egypt will start operating its new Sphinx International Airport near the Giza pyramids by mid-July with the aim of easing pressure on Cairo's main airport.
The airport near the new Grand Egyptian Museum in Giza on the outskirts of greater Cairo is part of plans to improve accessibility to historical sites for visitors, with links to popular Red Sea resorts like Sharm el Sheikh and Hurghada. Tourism receipts, a major source of foreign currency for Egypt, jumped to $3 billion in the last three months of 2021 from $987 million a year earlier as travel recovered from COVID-19 restrictions. (Reuters)
Now to EGX and Company talks, the standalone net profits of the Egyptian Media Production City Co (EMPC) jumped to EGP 46.94 million in the first quarter (Q1) of 2022, compared to EGP 30.40 million in the same period in 2021.
The company generated revenues of EGP 140.65 million in the first three months (3M) of 2022, up from EGP 126.63 million in the year-ago period, according to a bourse filing on Thursday. It is noteworthy to mention that in 2021, the company's standalone net profits rose by 33.22% to EGP 137.65 million from EGP 103.33 million in 2020. (EGX, Mubasher)
The ordinary general meeting (OGM) of EFG Hermes Holding (HRHO) has approved raising the company’s issued and paid-up capital by EGP 973.04 million, according to a statement filed to the Egyptian Exchange (EGX)
Accordingly, the issued and paid-up capital shall increase to EGP 5.83 billion from EGP 4.68 billion. The capital increase, amounting to EGP 973.04 million distributed over 194.61 million shares at a par value of EGP 5 per share, shall be implemented through the distribution of 1-for 5 bonus shares financed from retained earnings as per the budget of the period ended December 31st 2021. Moreover, the OGM endorsed the amendment of Articles 6 and 7 of the company’s Articles of Association. (EGX, Arab Finance)
Madinet Nasr Housing and Development (MNHD) has generated gross contracted sales of EGP 1.55 billion in the first quarter (Q1) of 2022, surging by 110.6% year-on-year (YoY) from EGP 739.2 million, according to the company’s Q1 2022 Earnings Release
Taj City made up 45.7% or EGP 711.9 million of MNHD’s contracted sales in Q1 2022, while sales from Sarai accounted for 54.2% or 845.1 million of total contracted sales. The company has sold 553 residential units in the three-month period ended March 31st, growing by 85.6% YoY from 298 units in the same period last year. Moreover, MNHD has generated revenues of EGP 818.4 million in Q1 2022, jumping by 82.2% YoY from EGP 449.2 million. The company also recorded a net profit of EGP 120.2 million for the January-March period of 2022, up by 3.2% from EGP 115.9 million in Q1 2021.Net cash collections increased by 4.5% in Q1 2022 to EGP 836.3 million from EGP 800.5 million in the same quarter of 2021. Delinquency rate recorded 4.7% by the end of the quarter, falling from 8.9% at the end of 2021. (EGX ,Arab Finance)