Philip Morris raises cigarette prices by up to 18%

Good morning, everyone. We have a relatively compact issue for you this morning, led by IMF Managing Director Kristalina Georgieva’s comments on our IMF program.

No float here: Our talks with the Fund have been about a more flexible exchange rate, but not a float of the EGP, Georgieva said.

^^ We have the full story in the news well, below.

PSA- Your smokes just got pricier: Cigarette manufacturer Philip Morris has hiked the price of cigarettes by up to 18%, the company said in a press release (pdf). The price of a pack of Merit has risen 15% to EGP 85, while the L&M brand will now go for EGP 59 a pack, up 18%. Marlboro prices have increased 14-17%, with a standard pack priced at EGP 79 and a pack of Crafted at EGP 69.

IQOS smokers haven’t been spared: The company has also raised the price of its HEETS Selections, HEETS Dimensions, and TEREA products 14% to EGP 64.

EGP WATCH-

Deval, rate hike incoming? JP Morgan expects the government to devalue the EGP to 45-50 against the USD, alongside raising rates by 200 bps, the bank wrote in a note on Friday. “We think the CBE will be looking to secure some FX inflows and engineer a lowering of the parallel market FX rate before considering a move to a managed float FX regime,” the report said. JP Morgan sees the central bank cutting rates in 4Q 2024 “as inflation is likely to ease, largely helped by base effects and a converging parallel rate” after unifying the official and parallel exchange rates.

More optimistic than other estimates: Oxford Economics sees the EGP falling to 55-60 to the USD in banks by the end of the year if the central bank moves to a flexible exchange rate regime, while Bloomberg’s chief emerging markets economist Ziad Daoud sees the greenback officially changing hands at EGP 50 or more by the end of the year. Capital Economics is even less optimistic, seeing the EGP falling further to sit at 65 against the greenback.

And in line with one: Societe Generale sees the government devaluing to 40-45 against the greenback, up from the current official rate of EGP 30.9.

WAR WATCH-

Another caution from Biden against civilian harm in Rafah: An Israeli invasion of Rafah should not happen without a “credible and executable” plan to ensure the safety and support of those living there, US President Joe Biden told Israeli Prime Minister Benjamin Netanyahu in a phone call last night, according to a White House readout. Biden last week called Israel’s attack on Gaza “ over the top.”

Israel is supposedly “working out a detailed plan” to evacuate Rafah’s civilians, Netanyahu told ABC News in a televised interview, without offering further information on the plan. “We’re going to get the remaining Hamas terrorist battalions in Rafah … We’re going to do it while providing safe passage for the civilian population.”

Mahmoud Abbas is in Qatar: Palestinian President Mahmoud Abbas is due to meet Qatari Emir Sheikh Tamim bin Hamad Al Thani in Doha today to look into ways to halt the Israeli aggression in Gaza, Palestinian news agency WAFA reported last night. It was not clear if other parties would be present.

Remember: Cairo is hosting another round of ceasefire talks tomorrow, featuring Mossad chief David Barnea, the head Shin Bet, Ronen Bar, intelligence chief Abbas Kamel, Qatari Prime Minister Mohamed Bin Abdul Rahman Al Thani, and CIA head William Burns, the Jerusalem Post and Axios reported on Saturday, citing what they said are Israeli and US officials.

Egypt once again expressed its “complete rejection” of Israel’s plans to enter Rafah in a statement yesterday, urging for a coordinated international and regional response to stop the invasion from going ahead.

RED SEA WATCH-

Vessels continue to avoid the Suez Canal: Some 60% of the ships usually passing through the Suez Canal have been opting for the route around South Africa’s Cape of Good Hope in response to ongoing Red Sea disruptions, Al Arabiya quotes International Maritime Organization (IMO) secretary-general Arsenio Dominguez as saying.

By other metrics: Some 12.8 mn tons of goods passed through the canal in the first six days of February, a 33% m-o-m drop, according to data from the IMF’s PortWatch.

HAPPENING TODAY-

Madbouly, Maait are in Dubai for the World Governments Summit: PrimeMinister Moustafa Madbouly and Finance Minister Mohamed Maait will be joining a large number of world leaders and decision makers, including IMF Managing Director Kristalina Georgieva, in the UAE to partake in the three-day World Governments Summit. The summit “explores the agenda of the next generation of governments, focusing on harnessing innovation and technology to solve universal challenges facing humanity.” The summit kicks off today and wraps up on Wednesday.

Panels to watch out for today: On the first of the summit, a number of Egyptian officials will be taking the stage.

• Madbouly will be taking the stage for a 10-minute speech.
• Central Bank Governor Hassan Abdalla will join his Tunisian counterpart Marouane El Abassi in a panel discussion under the title Challenges and Opportunities for Cross-Border Payment Systems ;
• CIT Minister Amr Talaat will be speaking at a panel on all things tech titled How Can Governments Drive Tech Progress While Ensuring Citizen Adoption?

** Check out the full agenda for the three-day summit here.

IN THE HOUSE-

The House is in session: MPs are meeting today to discuss and vote on the EGP 180 bn social support package announced last week by the presidency. The Budget Committee approved the package when it met yesterday after the cabinet approved it on Thursday.

On the agenda for today: The House will discuss and vote on a number of agreements that include:

• A EUR 500 mn grant from the European Investment Bank to support the Environment Ministry’s Sustainable Green Industry project;
• A EUR 80 mn grant from Germany to support the Environment Ministry’s solid waste management program, build 25 technological schools and centers, and support the central bank’s financial risk management program;
• An agreement to scrap double taxation and clamp down on tax evasion between Egypt and Croatia.

ICYMI- Missed this week’s Inside Industry? In our weekly vertical exploring all things industry and manufacturing, we took a close look at Egypt’s trade figures for 2023 with a rundown of what we exported and to whom. You can check it out here.

THE BIG STORY ABROAD-

It’s all war and technology in the global business press this morning.

War:

• Nobody believes Benjamin Netanyahu, who said Israel is “working out a detailed plan” to evacuate civilians from Rafah after Joe Biden warned him that Israeli forces shouldn’t move into the area without a “credible and executable” plan to safeguard non-combattants.
• Donald Trump is freaking out the Europeans with his suggestion that he’d be happy (if elected) to see Russia do “whatever the hell they want” to Nato allies that don’t meet minimum defense spending targets.

Tech:

• Tech giants have laid off at least 34k people since the start of the year as they get their heads around what AI means to their businesses and prepare for what’s next. And it’s not just Big Tech that’s trimming staff.
• OpenAI boss Sam Altman is still trying to raise as much as USD 7 tn (yes, tn, not bn) for a new AI chip and power production project, including from Arab investors.
• Apple’s Vision Pro is still having a moment, with tech pundits variously talking about how it is really for work, an eventual (not now) iPad replacement, and changing social norms about walking around wearing a face computer.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed.

In today’s issue: We speak to local edtech startup founders to find out why Egyptian edtech startups have been expanding in the Gulf.