The Madbouly government is still looking at how it will use the proceeds from the sale, but a top government official told us yesterday that addressing the import backlog and paying arrears owed to foreign partners are among cabinet’s top priorities.

The funding also puts cabinet in a strong position as it looks to negotiate the pacing-out of payments owed to foreign creditors this year. In all cases, the official said, the funding will significantly increase the government’s financial flexibility and leaves it well-positioned to bridge the financing gap.

We look good for about four years: The investment, alongside an expanded IMF assistance package, will together cover the country’s financing gap for the next four years,Goldman Sachs’ Farouk Soussa said in a note to clients. Earlier this month, the lender put Egypt’s total financing needs for the next four years at USD 25 bn — a USD 8 bn financing gap and USD 17 bn needed to stabilize the exchange rate.

Getting the ball rolling: The transaction will open the door for the central bank to move forward with the long-anticipated devaluation of the EGP and in turn move us closer towards a staff agreement with the IMF, Morgan Stanley economist Hande Kucuk said in a note. Having sufficient FX reserves in the banking system will keep the EGP from freefalling when the CBE floats or devalues the currency.

Brace for a “relatively modest” deval: Soussa sees the “magnitude of any devaluation is likely to be relatively modest compared to the current market pricing given the FX resources that will be available to the Egyptian authorities (and in the monetary system).”

It could all be closer than you think: “We think that the chances of an FX adjustment and announcement of a [staff-level agreement with the IMF] seem very likely before Ramadan,” the Morgan Stanley’s note read. We’re expecting Ramadan to kick off in two weeks.

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