Gov’t weighs parking state entities’ surpluses in its own debt to cut borrowing needs

Good morning, nice people. For most of this new retail crowd, 25 October was the first EGX trading halt they had ever seen, and it came after five years when buying every dip just worked.

Our big story today is what October’s selloff says about the investors now holding this market up: individuals were 74.9% of open-market turnover in October, by our math, while institutions sat out. Three of them tell us how they played the halt, and what the leverage behind the market means if the recovery is slow.

Also in the news well below, inflation did the CBE’s work for it. Urban prices slowed to 12.7% in October, a nine-month low, though monthly core picked up to 1.2%. We look at what that leaves for the last rate meeting of the year on 17 December and for the IMF review due 15 December.

And we have MNT-Halan’s first results since listing. Net income more than doubled q-o-q to EGP 836 mn, helped by fatter margins on the EGP 6.8 bn of loans it offloaded. The y-o-y is 31% lower — and we unpack the gap.

In energy, Alcazar closed USD 436 mn of European debt for its two Ras Ghareb wind farms, a third each from the EBRD, the EIB, and DEG. It’s the template Egypt needs for its 2028 renewables target without paying for the build itself.

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Record your question as a voice memo (30-45 seconds), tell us your name at the top, and send it to [email protected] by Thursday, 12 November. We’ll also take written questions, but since we’re an audio show, we’d love to play yours in your own voice.

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The state as its own lender

The government is studying whether to put part of state entities’ surpluses and funds into its own securities, a move that Finance Minister Ahmed Kouchouk says would directly cut state borrowing needs at home and abroad. Kouchouk presented the study’s results to President Abdel Fattah El Sisi at a meeting with Prime Minister Mostafa Madbouly yesterday, according to a presidency statement.

The shift would reduce the state’s overall reliance on high-cost debt from foreign markets, he says, which fits his broader argument that sustaining the budget’s primary surpluses will help bring down the national debt and narrow the deficit. Progress on that front carves out space in the budget for basic services, health, education, and social protection, he adds.

The treasury could use the help, since nearly everything it borrows now goes to rolling over old debt. It borrowed about EGP 4.3 tn at home in the first four months of FY 2026/27, almost all of it for refinancing. Short-term treasury bills, which mature within a year, made up 85% of accepted domestic issuance last quarter. Banks are carrying a chunk of the load, holding 36% of the outstanding EGP T-bill portfolio as of March.

How much difference it makes depends on details the statement leaves out, like which entities are covered, how large their surpluses are, and what yields they’d earn. The move builds on the Finance Ministry’s push earlier this year to claim a bigger share of earnings from public-sector companies and economic authorities. Their transfers came to EGP 35 bn in the first half of FY 2025/26, a figure a senior government source called “disproportionately low” given the companies’ strong operating performance.

Kouchouk also says the government wants to attract more investors to long-term bonds, which would stretch maturities on new domestic issuance from the current average of about a year. He also says swapping part of the debt for investments and quality alassets would ease the state’s financing burden.

Pricing for the pipeline

Banque du Caire (BdC) closed its first week on the EGX 5.5% above its EGP 5.30 offer price, ending Monday’s session at EGP 5.59 a share, according to market data. Trading has cooled since the debut, with turnover running at around EGP 250 mn a session, against EGP 2.02 bn on 2 November, or about 12% of the first day’s level by our math.

Part of the slowdown is by design, since the cornerstones have agreed to lock-ups that keep their shares off the market for now. Retail buyers have a cushion too: for 30 days after trading starts, they can sell their shares back at the offer price if the stock trades below it, under a stabilization mechanism run by CI Capital. That means fewer shares changing hands and less pressure to sell in a hurry. Banque Misr’s remaining 55% won’t be coming to market soon either. It can’t sell more shares for a year without the bookrunners’ consent, and EGX rules lock up 51% of the bank for at least two years. How BdC trades still matters beyond this transaction, since the state has more offerings lined up behind it.

Government sellers should be pricing for the pipeline rather than the transaction, Menthum co-founder and CEO Himanshu Shrimali tells EnterpriseAM. “It’s not about getting the max possible valuation from this specific IPO. It’s about building a market where people have faith that, ‘Hey, if I invest in IPOs, I am invariably going to get at least 15 to 20% pump.’” Leaving 10-20% on the table is good practice, in his view, precisely because the state has another 10 or 20 companies lined up, so the aim is to “keep the confidence going.”

REFRESHER- BdC listed on 2 November after Banque Misr sold 45% for EGP 36.37 bn (c. USD 658 mn), the largest IPO the EGX has seen in at least a decade and the state’s first privatization by IPO in two years. Institutions covered the private placement 5.95x, or 19.79x excluding cornerstones. Four foreign cornerstones (Helikon, Redwheel, Sustainable Capital, and Waha Investments) committed USD 256 mn pre-launch, and the EBRD and the IFC each agreed to take up to 15.74% of the enlarged private placement, worth as much as c. USD 102 mn apiece, or up to some 13.5% of the bank between them.

Data point

49.4 — that’s where Egypt’s Logistics Growth Index fell to in October, down 1.2 points from a revised 50.6 in September, according to the World Research Institute (WRI). That puts it back under the 50 line that separates expansion from contraction. It’s also the lowest reading in two months and below the index’s three-month average of 49.7. Egypt ranks 32nd of the 42 economies WRI tracks and last of the five in Africa, where the regional reading was 50.4 against 51.2 worldwide.

The decline came as business volume fell, with non-oil private-sector output and new orders dropping at their fastest pace in four months, WRI says. Supply strains made it worse: maritime disruptions tightened transport capacity, and supplier delivery times lengthened by the most since June, which WRI economist Stephen Poh links to material shortages. The contraction came even as early figures showed more freight moved through the Suez Canal in October.

What should we teach our kids in the age of AI? And on the policy-level, where do we start? On this episode of Making It, Sherif Kamel, dean of AUC’s Onsi Sawiris School of Business, discusses how AI shows up in the classroom.

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PSA-

WEATHER- Cairo is in for a crisp autumn day today, with a high of 23°C and a low of 14°C, a degree off yesterday’s high and a clear two degrees down on the night, according to our favorite weather app.

It’s a notch cooler in Alexandria too, with a high of 23°C and a low of 17°C.

The big story abroad

Lenders cooling on AI debt: Banks and credit investors are scrutinizing AI-related financing more closely and are wary of adding exposure to borrowers. Some say they would be hesitant to fund more transactions, even with guarantees from the biggest names in tech, Reuters reports, citing banking and credit sources. The pullback follows a selloff that wiped USD 2.5 tn off the Nasdaq 100 on Thursday, plus worries that the midterm results would bring more oversight on data centers.

Spying reports are rattling Nvidia investors. The chipmaker’s shares fell more than 5% yesterday after the company opened an investigation into reports that CEO Jensen Huang had been targeted by a Chinese intelligence operation. China has denied trying to entrap Huang, dismissing the allegations as “unsubstantiated” and “nothing but smears against China.”

France is blaming Iran for last month’s supermarket cyberattack. Paris summoned Iran’s ambassador and plans retaliatory sanctions “at a European level” over the October hack, which hit some 700 retailers. The hackers reportedly took remote control of store refrigerators and freezers, switched on defrost cycles to push up temperatures, and destroyed large amounts of fresh and frozen food. Some of the equipment caught fire. Tehran did not immediately comment on the allegations.

*** It’s Going Green day — your weekly briefing of all things green in Egypt: EnterpriseAM’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: We look into why Green Tech has put Abu Rawash plant on hold over a tariff split between USD and EGP, and why the regulator says the rate stands.