El Sisi meets IMF boss + the EGP posts gains against the USD in the black market

Good morning, wonderful people, and happy December. It’s almost inconceivable, but 2023 is now drawing to a close.

A BIG, HAIRY, IMPORTANT PSA- You need to call in your IT boss for a talk about securityamid an unconfirmed report that a second Egyptian blue chip has been hacked by LockBit, the world’s most successful ransomware gang. The report comes just a week after EGX-listed fintech giant Fawry confirmed its testing environment had been hacked by LockBit.

The allegation: A well-known cybersecurity and dark-web monitoring firm claims that LockBit has hit another high-profile Egyptian company. The monitoring outfit has posted what it says is a LockBit hack notice that alleges “we have stolen accounting data, audit data, commercial info, contracts private data … finance data, human resources data” and more. We have been unable to verify the claim and a company official reached yesterday declined to comment.

What this means: If it proves true, it suggests that LockBit has turned its sights on Egypt and other emerging markets — likely banking on companies here taking a less-sophisticated approach to cybersecurity.

On the whole, Egyptian firms tend to significantly under-invest in tech security, deploying low-or-no countermeasures, relying on outdated software and hardware infrastructure, failing to educate staff about how to practice good “security hygiene,” and having few systems in place to systematically assess and manage risk.

What do you need to do right now? Four things, we would argue.

• Get a quick education. Start with this five-minute primer for CEOs (pdf) from the US Cybersecurity and Infrastructure Security Agency. CEO Monthly has a good read if you have 10 mins; it focuses on small businesses, but the principles are universal. And check out this guide for CEOs from the Carnegie Endowment for International Peace.
• Bring in your head of IT / tech security / CTO / whoever is responsible and discuss this morning what your vulnerabilities are, what systems you have in place, and what they can do today to start setting things right.
• Accept that you will probably have to pay money to upgrade your systems and protect your company. And trust us — whatever it is, it’s far less than you’ll pay if you get hacked.
• Have your head of IT / etc start teaching staff today how to decide whether to click on a link or download a file on email.

WATCH THIS SPACE-

#1- El Sisi holds tête-à-tête with IMF chief in Dubai: President Abdel Fattah El Sisi expressed Egypt’s commitment to carrying out structural reforms during talks with IMF Director Kristalina Georgieva on the sidelines of the COP28 summit in Dubai on Thursday, Ittihadiya said in a statement. In a post on X, Georgieva praised Egypt’s “commitment to macroeconomic stability” and affirmed the IMF’s support for its reform drive.

BACKGROUND- The IMF has twice postponed reviewing Egypt’s USD 3 bn program this year amid a delayed transition to a floating exchange rate. Pundits think Hassan Abdalla’s central bank will pull the trigger in the coming weeks after the wrap of the presidential election, a move that is anticipated to lead to a speedy IMF review and the disbursal of almost USD 700 mn of fresh financing from the lender.

Times have changed: The war in Gaza appears to be changing the Fund’s calculations, with Georgieva saying last month that it is “seriously considering” increasing the size of the loan. An unconfirmed report earlier claimed the loan could be increased to more than USD 5 bn.

Speaking of the EGP… It gained on the USD in the black market late last week after weeks of decline: The price of the greenback on the parallel market eased to EGP 46, down from the EGP 51 recorded the week before, according to Masrawy. Despite the EGP 5 drop, the gap between the official and parallel market rates still stands at around EGP 16.

The usual caveats apply: The parallel market is by definition thin and opaque, making it difficult to figure out what a fair value is.

What gives? Nobody is certain. Speculation encompasses any and all of the following:

• A one-off drop in demand for the greenback may have beenhelped by news that the IMF was considering bumping up our loan program and that the EU is reportedly putting together a USD 10 bn investment package for us, former Banque Misr vice chair Sahar El Damati told Masrawy ;
• Some believe that the EGP gains were driven by a drop in demand for imported goods and a drop in the government’s FX spending;
• Others still point to rumors (largely debunked) that the state flooded the market with some USD 2 bn worth of FX late in the week;
• And there is speculation that fewer people were snapping up FX on the local market to buy CIB and EFG Holding GDRs, a common mechanism to move funds out of the country to pay for offshore expenses.

We have more on all of that in the news well and Last Night’s Talk Shows, below;

#2-Israel’s war on Gaza has the IMF rethinking its MENA outlook: The IMF is revising its economic outlook for the Middle East and North Africa due to the impact of the war on Gaza on the rest of the region, it said in a blog post on Friday. The Fund said that it would downgrade its forecasts for the most “directly exposed” economies to the effects of the war, and that it’s ready to increase its support for affected countries in the region..

Remember: The IMF recently lowered its 2023 MENA growth outlook by 0.5 percentage points, and now expects regional growth to drop to 2.0% from 5.6% in 2022. It also downgraded its 2023-24 outlook on Egypt for the second time this year to 3.6% from 4.1% previously.

HAPPENING TODAY-

Today is the last day for Egyptian expats to head to the polls to cast their presidential ballots — which opened on Friday — and choose between incumbent President Abdel Fattah El Sisi, Al Wafd Party’s Abdel Sanad Yamama, the Egyptian Social Democratic Party’s Farid Zahran, and the Republican People Party’s Hazem Omar.

** And it’s exactly one week before the polls open here at home on 10-12 December with the first-round results due on 18 December and a runoff, if necessary, to take place in early January.

HAPPENING THIS WEEK:

IT’S THE FIRST WORK DAY OF DECEMBER- As we near the end of the year — here are the key news triggers on which to keep your eyes on:

• PMI: S&P Global will publish Egypt’s PMI figures for November on Tuesday, 5 December.
• Foreign reserves: The central bank should release November’s foreign reserves figures this week.
• Inflation: Capmas and the CBE will publish the latest inflation data on Sunday, 10 December.
• Interest rates: The CBE’s Monetary Policy Committee will gather to discuss interest rates on Thursday, 21 December.

The Egypt Defence Expo (EDEX) will be firing off from tomorrow until Thursday:Around 35k defense and security professionals from across the world will land in Cairo for the defence expo at the Egypt International Exhibition Center. You can register to attend here.

THE BIG STORIES ABROAD-

The resumption of the war on Gaza is dominating the global front pages this morning as Israeli jets pound the south of the besieged enclave. The Western press is focusing on US officials’ increasing public criticisms of Israel’s campaign — statements which might carry more weight if the Biden administration wasn’t also ramping up arms shipments to aid its war effort. Everyone from Reuters and the Associated Press to the Financial Times and the Wall Street Journal have the story.

Israel turns to AI to amplify Gaza destruction: Israeli forces have been using an artificial intelligence system called “Habsora” to carry out strikes on residential homes where a single Hamas member might be residing, according to an investigation by +972 and Local Cal. The AI-based system, referred to by a former intelligence officer as a “mass assassination factory”, has allowed the IDF to generate more potential targets for its attacks than ever before, contributing to the destructive nature of Israel’s attacks during the initial stages of the war on Gaza, according to the study. (+972 | The Guardian)

ALSO-No “get-out-of-jail” pass for Agent Orange: The Trump election interference saga continues, with US District Judge Tanya Chutkan ruling on Wednesday that there is no legal basis that former presidents are immune to criminal charges after they leave office.

(New York Times | Reuters | Bloomberg)

MARKET WATCH-

Powell comments spark buy everything rally: Investors rushed into stocks, bonds, gold and risk assets on Friday on the back of remarks made by Fed chief Jay Powell. Despite a hawkish tone, the market interpreted his comments as signaling a sooner-than-expected pivot to rate cuts, sparking a rally across financial markets.

• The S&P 500 rose 0.6% on Friday to close at its highest level since March 2022;
• Bonds rallied, pushing the 10-year yield to three-month lows;
• Gold climbed 1.6% to hit a record high;
• The USD index fell 0.3%.

Powell is talking, but no one is listening: Though noting policy is “well into restrictive territory,” Powell said (watch, runtime: 1:09:45) that it would be “premature” to speculate that the Fed will ease policy. Still, investors remained optimistic. “Optimism that the Fed’s next move is going to be a rate cut, optimism that the US economy is going to avoid a hard landing — they’re strong drivers,” City Index analyst Fiona Cincotta told Bloomberg.

OPEC+ countries double down on supply cuts in 2024: Several OPEC+ countries agreed on Thursday to make deeper voluntary supply cuts in a bid to stabilize the markets, the alliance of oil producers said in a statement. Some 2.2 mn bpd will be removed from the market in 1Q 2024, with Russia committing to an additional 500k bpd cut and Saudi Arabia rolling over its 1 mnbpd reduction into 2024. The UAE, Iraq, Kuwait, Kazakhstan and Algeria will also reduce output during the period. The organization said it would gradually phase out the cuts starting 2Q 2024, depending on market conditions.

This isn’t the market reaction they wanted: Crude prices slumped almost 5% on Thursday and Friday following the announcement, which analysts attributed to the absence of a broader OPEC+ agreement and an expectation that the cuts would be deeper. “The market reaction implies disbelief in the full efficacy of the cuts,” Reuters quotes a JPMorgan analyst as saying.

CIRCLE YOUR CALENDAR-

A new round of GERD talks to take place this month: The fourth round of talks between Egypt, Ethiopia, and Sudan over the filling and operation of the Grand Ethiopian Renaissance Dam (GERD) is set to take place between 16-18 December in Addis Ababa, Irrigation Minister Hani Suweilam told local media on Friday (watch, runtime 5:57). This is the fourth round of talks since President Abdel Fattah El Sisi and Ethiopian Prime Minister Abiy Ahmed agreed to re-enter negotiations in July and reach an agreement within four months.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.