S&P sees a devaluation in our future: S&P Global Ratings is expecting authorities to devalue the EGP to half its current value to unlock the remainder of the IMF package, the rating agency said in a report. Once the devaluation is through, S&P sees the EGP trading at “a level that is more in line with the parallel market rate, which is currently at about 60 USD / EGP.” The rating agency thinks that “more clarity on exchange rate policy would benefit trade and economic growth and trigger an increase in remittance inflows.”

Remember: The central bank has maintained the USD / EGP exchange rate at 30.9 since March, despite EGP continuing to fall against the greenback in the parallel market.

No shocker here: Everyone agrees that a devaluation is on the way and it’s just a question of when and how much. Last we heard, traders are optimistic that the devaluation will be smaller than expected after IMF officials indicated that a full float of the EGP may not be in the cards for the immediate future, saying that the Fund is prioritizing getting inflation under control over exchange-rate reform.

We should know more soon: Representatives from the IMF were in town last week to discuss the two long-awaited stalled reviews of the loan program. Although not much has been revealed about the visit, an IMF spokesperson promised updates when the visit wraps up.

It's not looking good for the country’s banks: “We expect Egyptian banks' foreign-currency liquidity positions will continue to deteriorate,” the report reads, pointing to the FX crunch. Net foreign assets in commercial banks was at a negative USD 15.8 bn in November.

DEBT WATCH-

Citibank cuts bullish outlook for Egyptian USD bonds: Citibank has downgraded its recommendation for Egypt’s USD bonds issued in October to “marketweight,” after giving the bonds an “ overweight” recommendation last year, Asharq Business reports. “In contrast to our previously optimistic outlook, we now believe the situation has changed with a significant increase in interest rates expected over the next few months, with few signs of positive catalysts so far,” Citibank strategists wrote in a note seen by the outlet.

SOUND SMART- A marketweight rating is given to fixed-income securities to indicate that their yields align with market expectations — the rating varies depending on if the yield spread is over, under, or in line with market expectations.

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