President Abdel Fattah El Sisi has been elected to a third term in office with 89.6% of all ballots cast, National Election Authority (NEA) head Hazem Badawy said at a press conference yesterday (watch, runtime: 5:58). El Sisi will take the oath of office in early 2024 for a six-year term that will see him lead the country through 2030.

Here’s the rundown of the results, per the NEA (pdf):

  • El Sisi received 39.7 mn of the votes cast;
  • Hazem Omar (Republican People's Party) — 4.5% and nearly 2 mn votes;
  • Farid Zahran (Egyptian Social Democratic Party) — 4% and 1.8 mn votes;
  • Abdel Sanad Yamama (Al Wafd Party) — 1.9% and 822k votes.

Who voted? Over 44.8 mn people cast ballots, putting the official turnout rate at 66.8%— well over the 41.05% rate we saw at the 2018 election that handed El Sisi his second term. Some 98.9% of all ballots cast were valid.

Victory lap: The president acknowledged the challenges facing Egypt “on all fronts,” and reaffirmed Egypt’s condemnation of the “inhumane war” on Gaza. El Sisi also renewed his vows to “continue building the new republic” and offered thanks to both voters and his rivals at the polls, according to an Ittihadiya readout.

Pundits have been suggesting for months that the president would okay a float of the EGP after the election, though few have suggested a timeline. Among the questions that stand out this morning:

#1- Will we see a cabinet shuffle? Talk show hosts asked over the weekend when El Sisi would shuffle his cabinet, with well-connected MP and host Mostafa Bakry saying he had information — which he didn’t share — that there could be a shuffle before the president’s inauguration in April. Neither Bakry nor the usually voluble Amr Adib have suggested how sweeping the shuffle would be.

Prime Minister Moustafa Madbouly formed his government in the summer of 2018, but had served as interim PM from November 2017 after Sherif Ismail stepped down for health reasons.

#2- Will the central bank raise rates on Thursday as a prelude to doing away with what has become a peg for the EGP at 30.95 to the greenback? Our poll of analysts this week said no, with just two out of nine thinking the Monetary Policy Committee will go for a hike.

The Central Bank of Egypt may choose to coordinate policy with members of cabinet, but doesn’t report to the Council of Ministers. CBE Governor Hassan Abdalla reports to the central bank’s board and serves at the pleasure of the president. Abdalla was appointed earlier this fall to another one-year term.

#3- When will we move to a floating currency regime — and will it be a float or “managed devaluation,” potentially with a series of re-peggings, as some pundits have suggested.

A float would allow market forces to transparently set the value for the currency. The most likely scenario for a float would see the CBE kick things off with an interbank auction of USD to “discover” a market-clearing price. The dealing rooms at major banks would then effectively guide us all on the value of the EGP. A float is more likely in the event that Abdalla has lined up a war chest of USD to fight an “overshoot.”

A re-pegging could be a “hard” peg or one that allows the EGP to rise or fall within a defined band — and there could be more than one re-pegging over time as authorities test the water in search of a market-clearing rate. This is more likely if we don’t have a war chest and the goal is to set a price that brings USD back into the formal financial system (there’s been plenty of cash stuffed under mattresses since early 2022).

A realistic peg could also convince asset holders and would-be buyers to start transacting — particularly foreign investors who have interest in the “Egypt story” but who have not committed capital here in the expectation that they would take a haircut when a float or devaluation happens.

#4- Do we have firepower to fight an overshoot? Conventional wisdom is that in a true float, a war chest would allow the central bank to make more FX available (if necessary) and in doing so bring the USD down from the stratosphere if it overshoots a “fair” market-clearing rate.

Officials have made no announcement about a build-up of FX, though we’re talking with the International Monetary Fund about a 2-4x expansion of our latest USD 3 bn program and the European Union may be readying a USD 10 bn assistance and investment program. It remains unclear whether our Gulf allies will provide deposits or grants. The state asset sale program is showing signs of multi-bn USD momentum, but that’s a longer-term game.

#5- Will we see Kristalina Georgieva in town soon? Clarity on a third term in office for President Abdel Fattah El Sisi gives the president a clear mandate to conclude an agreement — and should leave the IMF feeling more confident that it’s safe to move ahead.

#6- Will a float or managed devaluation turbocharge inflation? Not if it’s to something in the EGP 40-45 range (the range some research houses have put on the table). And probably not if it’s closer to the EGP 48-52 range at which the greenback is changing hands in the (illiquid, opaque) parallel market.

Most goods (and very few professional services) are already selling at rates that have “priced in” the USD at about 50 — there should be no significant flare-up if wholesalers and retailers don’t go overboard.

Um, Enterprise? What’s a “market-clearing rate”? It’s an exchange rate — whether established by the CBE or the market — that establishes a value for the EGP at which supply and demand reach equilibrium. In other words: everyone who wants to buy or sell the EGP at that price can do so. A market-clearing rate is one that prompts FX held outside the banking system to flow into accounts, investors to invest, and asset holders to feel confident that they’re selling at a price that’s good for them.

GLOBAL REAX

Congratulations roll in: World leaders congratulated El Sisi on his re-election, including UAE president and ruler of Abu Dhabi Sheikh Mohamed bin Zayed Al Nahyan, Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum, Saudi King Salman and Crown Prince Mohammed bin Salman, Palestinian Authority President Mahmoud Abbas, and Jordan ’s King Abdullah.

The election results got a lot of ink in the foreign press. (New York Times | Reuters | Bloomberg | Washington Post | BBC | CNN | Financial Times)

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