IMF staff-level agreement on third loan review to open up USD 820 mn following board approval

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What We're Tracking Today

A new cabinet in place by Tuesday?

Good morning, folks. We’ve only got five work days ahead of us before Eid Al Adha kicks off next Sunday, but it looks like we may have a lot of local business, politics, and economy news coming our way until then. Come the end of Tuesday, a new government is expected to have been sworn in, and there are suggestions we could see up to more than half of the current ministers replaced.

But that’s not all, we’ve also got news that the IMF has reached a staff-level agreement on the third review of our loan program that will open up more funding a little down the line, the latest forecasts on May’s inflation figures due to be released tomorrow, and a government tender in the works for 20 LNG shipments. So without further ado, let’s jump in.

WATCH THIS SPACE-

Madbouly’s new gov’t to be sworn in on Tuesday: Prime Minister Moustafa Madbouly’s new government will make their oath before President Abdel Fattah El Sisi on Tuesday, said well-connected MP and TV presenter Mostafa Bakry on Sada El Balad (watch, runtime: 1:33:28).

We could be seeing a lot of new faces — and ministries: Bakry thinks that we could see up to 18 of the 32 ministers replaced and even new ministries being created. A governor shuffle is also expected to be announced on Thursday or before the Eid Al Adha break, Bakry added.

What happens after? The oath will be followed by an urgent session at the House, during which the new government will present its policy statement, before moving to a vote of confidence after the Eid Al Adha break.

PSA-

WEATHER- It’s a little cooler in Cairo today, with a high of 36°C and a low of 23°C, according to our favorite weather app.

And as usual, it’s a little cooler still in Alexandria, with a high of 30°C and a low of 20°C.

** DID YOU KNOW that we now cover Saudi Arabia and the UAE?

** Want to subscribe? Tap or click here to get your own copy delivered every weekday before 7am Cairo time — without charge.

HAPPENING TOMORROW-

#1- Inflation nation: Capmas and the CBE are expected to publish inflation data for May tomorrow. Policy makers and the business community will be hoping that headline inflation cools for a third consecutive month in May, after having eased on the back of slower food price increases as traders continued to price in a lower exchange rate than in the now-defunct parallel market.

The forecasts have started rolling in: Annual urban inflation is forecasted to drop to 30.4% in May, down from 32.5% the month before, according to the median forecast of 19 analysts polled by Reuters. Standard Chartered expects May’s inflation data to come in at 29.8%, the lender’s MENA economist Carla Slim said. The bank sees inflation falling to around 25% by the end of the year and further cooling to around 20% in 2025, Slim added.

#2- Good luck, high school seniors (and parents): Thanaweya Amma exams kick off tomorrow and run through 20 July. Best of luck to all those entering exam halls or cheering on from the school gates.

HAPPENING THIS WEEK-

#1- Blinken is coming to town: US Secretary of State Antony Blinken will visit Egypt, Israel, Qatar, and Jordan starting tomorrow until Wednesday to hold discussions on the latest ceasefire proposal laid out by US President Joe Biden, the State Department said.

Stalled diplomacy: While Hamas was initially reported to have viewed the proposal “positively,” progress toward a ceasefire agreement has stalled with Israeli Prime Minister Benjamin Netanyahu doubling down on his insistence that Hamas must be completely destroyed before bringing the war to an end.

#2- We’re days away from the Emergency Humanitarian Response Conference for Gaza, which Egypt, Jordan, and the UN are jointly hosting in Jordan on Tuesday. The conference aims to reach a solution that would ensure the delivery of humanitarian and medical aid for Gaza. The conference will be attended by a number of world leaders — including Blinken — and heads of humanitarian missions.

#3- Egypt to host first seminar of Brics’ New Development Bank outside a founding member state: The bank’s president and former Brazilian head of state Dilma Rousseff will be in the New Administrative Capital on Monday and Tuesday for the bank’s first international seminar held outside a founding member state of the bloc, the International Cooperation Ministry said in a statement.

Remember: Egypt joined the bank in March 2023 and became an official Brics member in January 2024.

CORRECTION #1- In Thursday’s issue, we incorrectly said that Egypt issued sovereign sukuk in the current fiscal year. The Finance Ministry closed its maiden sukuk issuance in February 2023. We have since amended the story on our website.

CORRECTION #2- We also incorrectly said that Mountain View’s latest North Coast project is located in Ras El Hekma. The project is in Sidi Abdel Rahman. We have since amended the story on our website.

THE BIG STORY ABROAD-

An Israeli raid to free hostages is dominating headlines across the globe, but the detail that 210 Palestinians were killed in the operation to release four hostages is tellingly absent from much of the international press. “To free four people, Israel killed dozens of innocent civilians,” a paramedic told Reuters, describing the bombardment that centered on a market place and mosque as a “massacre.”

While over in the international business press, all eyes are once again on tech oligarch Elon Musk and Tesla shareholder opposition to his record USD 56 bn pay award, with a Norwegian sovereign wealth fund making clear its intention to vote no on the award when it comes up for a vote on Thursday.

In our neck of the woods, Aramco is set to allocate around 60% of its shares offered in a secondary share sale to foreign investors, after it drew in order of over USD 65 bn on the back of decent demand from international buyers.

And in case you missed it, the European Central Bank slashed rates on Thursday for the first time in five years, just a day after the Bank of Canada also cut rates. But we won’t be seeing the Fed following suit anytime soon, say traders, who still see rates keeping steady when the Fed meets to review interest rates this week and then again when it meets in July.

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IMF reaches staff-level agreement with Egypt on third loan review, opening up a further USD 820 mn after board approval

Egypt is slated to get a fresh USD 820 tranche from the IMF within weeks: The International Monetary Fund has reached a staff-level agreement with Egypt on the third review of its expanded USD 8 bn loan program, which is set to unlock USD 820 mn after the Fund’s executive board gives the go-ahead “in the coming weeks,” the Fund said in a statement.

Remember: A second IMF tranche of USD 820 mn reportedly entered the state’s coffers in April, nearly a month after the IMF’s executive board signed off on a USD 5 bn extension for the facility and completed its long-delayed first and second reviews. An initial tranche of USD 347 mn was dispersed in December 2022.

THE KEY TAKEAWAYS FROM THE REVIEW-

Structural reforms had a noticeable impact on the economy: The IMF mission — which visited Cairo between 12-26 May — pointed to Egypt’s resilience despite the surrounding geopolitical challenges, with the mission’s Head Vladkova Hollar saying that the country “stayed the course to preserve macroeconomic stability through fiscal discipline, tight monetary policy, and a shift to a flexible exchange rate regime,” all of which have helped boost FX availability, cool off inflation, and prompt recovery in the private sector.

But risks loom large: The Fund warned that the impact of the war on Gaza and trade disruptions in the Red Sea could pose a threat to the country’s economic outlook. This, coupled with domestic structural challenges, means that the government will have to stick to its reform agenda developed with the IMF to maintain and develop the progress it has made, Hollar said.

Prudence is key: If the government is able to meet its primary balance targets, this should help reduce debt sustainability risks, Hollar argues. The government should also work to up domestic revenues so it can spend more on education, healthcare, and social programs.

The privatization program will support debt management: The privatization of state-owned companies and assets will further support debt management and is expected to “improve efficiency and attract new investment, while generating additional resources for the treasury,” Hollar said. Hollar also called for state-owned energy companies to work towards “gradually” balancing their books.

Inflation is still firmly in the sights of the Fund: The Fund kept up its calls for us to keep working towards becoming an “inflation-targeting regime” by calling for monetary policy to be kept tight to keep inflation falling to the central bank’s target.

ICYMI: Negotiations are also underway for Egypt to access an additional; USD 1.2 bn in long-term, low-cost climate financing from the IMF's Resilience and Sustainability Facility.

Reuters and Bloomberg also had the story.

Höegh LNG’s floating regasification unit set to dock in Egypt’s Ain Sokhna next week

A floating regasification unit will dock in Egypt next week: Ain Sokhna will receive the floating LNG regasification unit that the government will lease from Norway’s Höegh LNG in mid-June as it gears up to welcome LNG shipments to help meet heightened local demand, an anonymous government source reportedly told Asharq Business. The government is leasing the unit until February 2026 for USD 90 mn a year, according to unconfirmed media reports.

What’s next? The unit will run on a trial basis for a seven-day period before it kicks off operations, Asharq Business’ source added.

LNG tender incoming: The Madbouly government is expected to launch an international tender seeking over 15 shipments of LNG over the coming few weeks, a government source told us last week. The government is expected to launch an international tender for the shipments between mid-June and early July, one industry source told Reuters, while another source said the tender is awaiting the appointment of the oil minister in the new cabinet.

The price tag? Last we heard was that the state was going to spend around USD 120 mn a month for three shipments.

Remember? A dip in domestic production has pushed the country from being a net exporter to a net importer of LNG in recent months. The government has been ramping up imports in efforts to address the supply gap caused by heightened demand, which translated into extended power cuts and most recently had the government slashing gas supplies to fertilizer companies to cut supplies to feed power generators instead.

Issue resolved? The Oil Ministry on Thursday said it has started gradually increasing the gas supplies to fertilizer companies.

The EGP float, higher revenues push up EGX-listed Elsewedy Electric’s bottomline

Elsewedy Electric “maintained its growth trajectory:” Elsewedy Electric saw its net income after minority interest rise 37% y-o-y in 1Q 2024 to EGP 4.0 bn “due to increased revenue and a foreign exchange gain from the revaluation of foreign currency receivables from international operations,” according to the company’s latest earnings release (pdf). Revenues rose 35.7% y-o-y to EGP 45.3 bn during the quarter.

Driving the growth: The company pointed to the float of the EGP and higher pricing in EGP on some of its products for pushing its top line up. The wires and cables segment was the main driver of revenues, growing 56.5% y-o-y to during the quarter to EGP 27.9 bn, followed by its turnkey projects, which grew 7.2% y-o-y to hit EGP 12.4 bn.

Looking ahead: “Going forward, our ability to continue delivering growth and value to shareholders is underlined by our commitment to sustainability and innovation, which ensures that we are not just keeping pace with industry advancements but are also at the forefront of shaping the future landscape of integrated, infrastructure solutions,” CEO Ahmed El Sewedy wrote.

Allianz Egypt promotes Ahmed Lotfy to managing director

Allianz has a new managing director at the helm: Global ins. giant Allianz’s local arm, Allianz Egypt, promoted Ahmed Lotfy (LinkedIn) from retail director to managing director, according to a statement (pdf). Lotfy boasts over 20 years of experience in the sector, having climbed the ladder at AIG Egypt beginning in 2002 and moved to Allianz Egypt in 2014.

El Sisi meets his Azerbaijani counterpart to discuss Gaza, trade, and tensions with Armenia

It was a mixed bag on the airwaves last night, with government officials calling in to our nation’s talking heads to make clear that gas supplies to fertilizer companies have been restored and that they’re on track to clear their arrears with international energy companies, alongside coverage of the Azerbaijani premier’s visit to the country.

Gaza was top of the agenda of the meeting between President Abdel Fattah El Sisi and Azerbaijani President Ilham Aliyev, said Al Hayah Al Youm’s Mohamed Sherdi, explaining that “for us as Egypt, it [Gaza] is the main issue now that occupies our minds” (watch, runtime: 2:08). World leaders also “want to know the vision of the Egyptian president on this file and the developments related to this file,” Sherdi added. The two also discussed strengthening economic ties and El Sisi commended recent efforts to ease tensions with Armenia. Ala Masouleety (watch, runtime 15:02) also dedicated airtime to the visit.

“Gas supplies to fertilizer factories were restored as of last Thursday,” Oil Ministry spokesperson Hamdi Abdel Aziz said in a phone call with Lamees El Hadidi (watch, runtime 12:26), following news last week that the Oil Ministry had reduced gas supplies to high-energy-consuming fertilizer plants last week by 20-30%. He confirmed that “supplies have returned to their normal levels before the heatwave that hit the country last week.”

Arrear payments to international oil and gas companies are also back on, as the government will pay 25% of its arrears to international oil and gas companies operating in the country this week, Abdel Aziz added. The government already paid 25% of its debts in March, Abdel Aziz explained.

Blackouts could be coming to end by November, with electricity load shedding expected to end by November or at the latest in December, Ahmed Moussa said on Ala Masouleety, citing a high-level official (watch, runtime: 1:13). Amr Adib called on the government on El Hekayah to stop power cuts in Aswan, where temperatures neared 50°C on Thursday (watch, runtime: 13:18).

The latest on Egypt’s efforts to host the 2036 Summer Olympics

What’s better than one Olympic dream? Two Olympic dreams. Egypt is walking into the 2024 Paris Olympic Games with its biggest ever delegation of athletes in hopes of outdoing its performance in the 2021 games — its best in over seven decades — Reuters writes. Another strong performance would “continue to build [Egypt’s] credentials for a possible tilt at hosting the Summer Games in 2036,” the newswire writes.

Where do things stand? Egypt is ready to organize the games, Egyptian Olympic Committee Treasurer Mohamed Abdel Aziz said, adding it has reached “60% of the organizing efforts, including facilities, roads … the rest are related to budget and financial issues.”

This wouldn’t be Egypt’s first crack at hosting the competition: Following three failed Olympic bids, Egypt has spent the past seven or eight years developing the main support infrastructure to make it better qualified to host the games, which includes the new capital’s 92-acre Olympic City. A successful bid would make Egypt the first country in Africa to host the games.

** Dive deeper: We took a look at how the Madbouly government is looking to the private sector to develop our sports infrastructure ahead of our planned Olympics bid in a Hardhat last year.

International Holding Company subsidiary Palm Sport to operate Al Ahly’s El Qalaa El Hamraa. PLUS: EGP 5 bn aluminum factory, trade talks with Russia, startups news galore

INVESTMENT-

#1- Al Ahly’s new sports complex in Sheikh Zayed gets an Emirati operator: Abu Dhabi-based sports management firm and International Holding Company subsidiary Palm Sports has been named as the operator of Al Ahly FC’s newly announced sports city complex dubbed El Qalaa El Hamraa, the company said in a statement (pdf).

Remember: A consortium of more than a dozen companies led by Al Qalaa Al Hamra Co. and exclusively advised by our friends at Beltone Investment Banking announced last week that they would be building an EGP 12 bn sports city complex in Sheikh Zayed that will house Al Ahly’s new 44-k seat home stadium. In addition to the stadium, the city will include an Ahly Club museum, university, school, and a hotel as well as a hospital with a focus on sports sciences.

#2- Haroun for Aluminum to set up EGP 5 bn aluminum profiles factory: Delemar Aluminum’s parent company Haroun for Aluminum wants to invest EGP 5 bn to build an 150k sqm aluminum profiles factory in Sadat City, Al Borsa reports. The factory is slated to be fully completed by 2029 and be funded through a mix of the company’s funds and financing from banks.

TRADE-

Egypt eyes expanded trade ties with Russia: Trade Minister Ahmed Samir discussed boosting bilateral trade and the recent proposal to set up a storage facility for Russian grain with Russian officials during his visit to the country, according to a ministry statement. Samir also met with auto company Sollers to discuss producing trucks in Egypt, cybersecurity company Cyberus to talk about developing Egypt’s IT and cybersecurity capabilities, oil giant Lukoil to find out more about its plans for Egypt, and conglomerate Sistema Group to discuss transport, tourism, IT, and paper industry cooperation.

STARTUPS-

#1- An accelerator targeting edtech startups: Nahdet Misr’s VC arm EdVentures and Mastercard Foundation have launched the Mastercard Foundation EdTech Fellowship in Egypt, an accelerator program that aims to support local startups operating in the edtech sector through an eight-month program and USD 60k in funding, according to a press release (pdf).

Cohort one has already been selected: Some 12 startups have already been selected to participate in the first round of the accelerator program, out of a total 36 edtech startups that the fellowship aims to support over the next three years.

** Applications are now open: Egypt-based, scalable edtech companies in the growth stage that are at least three years old can apply to be part of cohort 2. Apply here.

#2- Elevate, the fintech startup targeting Egyptians closes pre-seed round: London and Dubai based fintech startup Elevate has closed a USD 5 mn pre-series A funding round, which will fund its expansion across the Middle East and Africa, according to a press release (pdf). The startup will also use the fresh funds to introduce new financial services to its offerings, such as savings and investment accounts.

Elevate? Elevate provides US-based USD deposit accounts insured by the US Federal Deposit Ins. Corporation, tailored for non-US resident freelancers in emerging markets — that includes Egypt, the Philippines, Pakistan, and Bangladesh. “The rise of remote work and freelancing is a game-changer for emerging markets in the Middle East and Africa," CEO Khalid Keenan said.

#3- Banknbox attracts more fintech services to Egypt: Cairo-based third-party payment processing platform Banknbox inked strategic partnerships with banks and fintech firms from eight countries during 1H 2024 to bring their services to Egypt via the company’s online platform, according to a press release (pdf).

Turkey could levy a tax on stocks

Is Turkey mulling a tax on stock and crypto investments? Bloomberg reported earlier on Tuesday that Turkey is close to imposing a transaction tax on trading in stocks and cryptocurrencies, citing official sources, who revealed that the Finance Minister discussed the plan last week. Treasury and Finance Minister Mehmet Simsek last week denied the news, saying only that the government is considering a “very limited” transaction tax.

The tax would come as part of a monetary tightening plan, aimed at shoring up Turkey’s fiscal position and boosting price stability, Reuters reports.

Turks are taking a liking to the market: This move could reel in substantial proceeds as more Turks are investing in the stock market, which saw equity accounts surge to 8.3 mn this year, a nearly seven-fold increase since early 2020, Bloomberg said, citing the Central Securities Depository of Turkey.

But the tax could reduce volatility, analysts say: “In the short term, this sounds like pain for the equity market, but in the long term, it means a huge gain, [as this tax may] reduce volatility, enhance the investment culture and reduce speculation,” Burak Cetinceker, a money manager at Strateji Portfoy in Istanbul told Bloomberg.

ALSO IN PLANET FINANCE- Gamestop shares fell almost 40% on Friday after the company reported a 29% y-o-y dip in net sales during 1Q 2024 and shared its plan to sell more shares. Meme stock trader Roaring Kitty’s held his first livestream in three years to sway investor sentiment, but failed to stop the sell-off. (Financial Times)

EGX30	26,429	-0.8% (YTD: +6.2%)
USD (CBE)	Buy 47.45	Sell 47.59
USD (CIB)	Buy 47.48	Sell 47.58
Interest rates (CBE)	27.25% deposit	28.25% lending
Tadawul	11,560	+0.1% (YTD: -3.4%)
ADX	8,957	+0.2% (YTD: -6.5%)
DFM	3,982	+0.1% (YTD: -1.9%)
S&P 500	5,347	-0.1% (YTD: +12.1%)
FTSE 100	8,245	-0.5% (YTD: +9.0%)
Euro Stoxx 50	5,051	-0.4% (YTD: +11.7%)
Brent crude	USD 79.62	-0.3%
Natural gas (Nymex)	USD 2.92	+3.4%
Gold	USD 2,325	-2.8%
BTC	USD 69,362.10	+0.2% (YTD: +64.1%)

THE CLOSING BELL-

The EGX30 fell 0.8% at Thursday’s close on turnover of EGP 2.0 bn (58.2% below the 90-day average). Local investors were net sellers. The index is up 6.2% YTD.

In the green: Eastern Company (+4.9%), Delta Sugar (+2.5%), and Mopco (+0.7%).

In the red: E-Finance (-6.3%), Qalaa Holdings (-3.8%), and Palm Hills Development (-3.3%).

CALENDAR

2024

JUNE

10 June (Monday): CBE and Capmas to publish inflation data for May.

15-19 June (Saturday-Wednesday): Eid El Adha (TBC) (national holiday).

29-30 June (Saturday-Sunday): EU-Egypt Investment Conference.

30 June (Sunday): June 30 Revolution Day (national holiday).

JULY

2-3 July (Tuesday-Wednesday): Aswan Forum for Sustainable Peace and Development, Cairo, Egypt.

7 July (Sunday): National holiday in observance of Islamic New Year (TBC).

16-17 July (Tuesday-Wednesday): The Egypt Mining Forum, Cairo, Egypt.

18 July (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

23 July (Tuesday): Revolution Day (national holiday).

AUGUST

4-5 August (Monday-Tuesday): Egypt Expat Forum.

SEPTEMBER

2-5 September (Monday-Thursday): Egypt International Airshow, El Alamein International Airport.

5 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

15 September (Sunday): National holiday in observance of Prophet Muhammad’s birthday (TBC).

25-26 September (Wednesday-Thursday): The Asian Infrastructure Investment Bank’s (AIIB) 2024 annual meeting, Samarkand, Uzbekistan.

OCTOBER

6 October (Sunday): Armed Forces Day.

17 October (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

13-17 October (Sunday-Thursday): Cairo Water Week, Water and Climate: Building Resilient Communities, Cairo, Egypt.

21-27 October (Monday-Sunday): The World Bank and IMF annual meetings.

NOVEMBER

4-8 November (Monday-Friday): World Urban Forum, Cairo, Egypt.

21 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

26-28 November (Tuesday-Thursday): Egypt Energy Show, Cairo, Egypt.

DECEMBER

26 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

EVENTS WITH NO SET DATE

June 2024: Gov’t expects to finalize sale of Beni Suef combined-cycle power plant.

1H 2024: Gov’t expects to finalize sale of four water desalination plants.

2H 2024: Gov’t to launch the Cairo Ring Road BRT buses.

3Q 2024: Egyptian-Armenian Joint Committee.

November 2024: Egypt to host the World Urban Forum (WUF12).

End of 2024: The launch of the high-speed train line linking Ain Sokhna with Al Alamein City.

End of 2024: Shalateen Mining Company to launch a gold exploration tender in the Eastern Desert.

2025

EVENTS WITH NO SET DATE

2Q 2025: Safaga Terminal 2 to start operations.

2027

20 January-7 February: Egypt to host the African Games

EVENTS WITH NO SET DATE

End of 2027: Trial operations at the Dabaa nuclear power plant expected to take place.

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