It’s the day after the float. Following the news barrage yesterday, we decided to take one step back today to recall together the months that preceded the Central Bank of Egypt’s decisions, and how Egypt has been collecting ammo to ensure the ability to liberalize the exchange rate and its sustainability.

How the government has been preparing: The government has taken steps over the past 12 months to shore up its FX buffers as it geared up for the devaluation, attracting FX via the sale of state assets and the issuance of government debt instruments. It also took measures to mitigate the float’s effect on the average citizen, hiking the minimum wage by 100% since last year.

#1- Ras El Hekma agreement: The Madbouly government inked a USD 35 bn agreement with ADQ last month, giving the Abu Dhabi wealth fund and longtime investor in Egypt the development rights to Ras El Hekma on the North Coast in what was Egypt’s largest FDI transaction.

Egypt received the first USD 10 bn tranche from the Ras El Hekma agreement last weekend, and an additional USD 5 bn tranche is set to be rolled from a previous UAE deposit at the Central Bank of Egypt, Prime Minister Moustafa Madbouly said at the time. Meanwhile, the remaining USD 20 bn from the agreement will be deposited within the next two months — USD 6 bn of which will be from existing UAE deposits at the CBE. Altogether, some USD 11 bn worth of UAE deposits will be converted.

ALSO- Egypt received USD 520 mn as part of the USD 800 mn sale of seven historic hotels to Talaat Moustafa Group’s Icon Investments.

#2-Rebooted state privatization program: The state’s privatization program was rebooted in February of last year and later expanded to include 35 companies that will sell stakes to private investors. The government raised some USD 5.6 bn from the program between April 2022 and December 2023. The government reportedly tapped 61 additional companies in January to be added to the list.

Egypt is aiming to raise some USD 6.5 bn through finalized sales from the privatization program by the end of 2024. A large chunk of that could be raised by June through stake sales of Wataniya, Gabal El Zeit wind farm, Port Said and Damietta Container & Cargo Handling companies, United Bank, and a Siemens-built power plant in Beni Suef, sources in the know told Enterprise.

#3- Wage hikes: An EGP 180 bn social protection package announced last month by President Abdel Fattah El Sisi went into effect this month. The package includes raising the public sector minimum wage by 50% to EGP 6k, increasing pension payouts by 15%, implementing salary increases for employees in the education and healthcare sectors, and raising the personal income tax exemption threshold to EGP 60k from EGP 45k.

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