Gov’t after high-impact investment to build reserves buffer

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Gov’t seeking north of USD 6 bn in “high-impact” investment to build reserves buffer

The Madbouly government is looking to net at least USD 6 bn from its divestment program as it lays the groundwork for our final two reviews under an extended fund facility (EFF) with the International Monetary Fund, three senior government officials tell EnterpriseAM. The program is due to wrap by the end of this year.

Why this matters: The emphasis of the divestment program is to bring in capital that moves the needle for the economy, the officials say, emphasizing high-impact investment inflows over traditional debt financing to close our funding gap.

“A new large-scale transaction similar to Ras El Hekma and Alam El Roum ensures continuous investment flows, generates new jobs for Egyptian companies, and maintains demand for construction materials for years to come,” one of the sources said. By prioritizing investment and not just debt, the government aims to boost tax revenues and export capacity, which ultimately accelerates growth rates and lowers the overall debt-to-GDP burden.

The details: The IMF did not specify the mechanism for exit or stake sales, but its primary metric for success in the EFF is our ability to build FX reserves of USD 55-56 bn before the program ends. The goal is to see us build a hedge against future economic or geopolitical shocks and pivot out of the “perpetual borrower” trap. While the reserve target is mandated, there’s no agreement on the timing and or choice of assets that may be in the disposal program, our sources say.

How they’ll do it: The government plans to secure between USD 3-4 bn through the privatization of key state-owned assets by October 2026. These include stakes in Banque du Caire, bottled water maker Safi and filling station operator Wataniya (both military-owned companies) and the Gabal El Zeit wind power plant. The government’s minority stake in Alexbank is also on offer. The list also includes stakes in 13 public sector enterprises that will be ready for offering at percentages ranging between 10-40% under partnership with the private sector.

Cabinet will also fast-track the tenders for 12 buildings in Ministries Square — former ministry headquarters in Downtown Cairo — slated for 1Q 2026. It hopes to net proceeds of between USD 2-3 bn. Officials are also in the final stages of a master plan for the sale of land at Ras Banas on the Red Sea Coast.

REMEMBER- Just last week, Egypt received the USD 3.5 bn cashbased portion of the Alam El Roum development agreement from Qatari Diar. This influx of funds was the catalyst that helped Egypt reach the recent staff-level agreement with the Fund on the fifth and sixth reviews after meeting its requirements regarding foreign currency buffers and the closure of financing gaps. Egypt is set to receive some USD 2.7 bn next month once the Fund’s Executive Board approves the reviews.

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EGP enters 2026 full steam ahead as “speculative pricing” era ends

The EGP closed 2025 on a high note, having appreciated 6.7% for the year against the greenback. Driven by a record-breaking surge in remittances, surging tourism, and improving exports, the EGP is widely projected to strengthen further in 2026 as the nation moves from a “vicious cycle” of devaluation to a “virtuous cycle” of upgrades, according to industry experts we spoke to.

By the numbers:

Record reserves: Foreign exchange reserves reached a record USD 50.215 bn in November;
Remittance surge: Inflows from Egyptians abroad hit an unprecedented USD 33.9 bn in the first ten months of 2025 — a 42.8% y-o-y increase since the March 2024 float;
NFA rebound: Net foreign assets (NFAs) reached USD 22.7 bn by end-October, marking a massive recovery from the negative territory that defined 2022–2024;
Suez Canal recovery: While Red Sea tensions cut Suez Canal revenues to USD 3.6 bn in fiscal year 2024-2025, a gradual rebound to USD 5.5 bn is expected by FY 2026-2027 as trade activity normalizes.

“When these indicators come together, they generate a compounded effect known as the accumulation of foreign currency surplus, which helps address the liquidity shortages that have historically put pressure on the EGP,” EG Bank Board Member Mohamed Abdel Aal tells us.

A series of strategic and global shifts are helping prop-up the EGP:

Positive real interest rates: Egypt remains a magnet for foreign investors in local debt instruments. High positive real rates — maintained even as inflation cools — ensure a sustainable inflow of USD to meet financing needs, Abdel Aal tells us.
The sharp decline in credit default swap spreads makes it easier for Egypt to issue new bonds and sukuk, Al Ahly Pharos’ Hany Genana tells us.
Strategic economic and fiscal measures: Major investment transactions are expected to conclude, bringing in fresh USD inflows or facilitating debt swaps. The government is moving ahead with its asset privatization plans, including assets like Banque du Caire.
Lower energy prices: A decline in global prices for imported oil and gas, coupled with higher domestic production and increased imports via pipelines, is expected to slash the trade deficit.

Our take: For the private sector, the story is less the absolute exchange rate but the death of both the parallel market and the fear-based pricing it sparked. Manufacturers who once priced goods based on their expectations of future black-market rates are returning to rational planning. With the USD now readily available in banks, the EGP has shifted from a source of daily anxiety to a stable anchor for corporate budgeting.

The IMF factor: The successful conclusion of the IMF’s fifth and sixth reviews paves the way for a USD 2.7 bn payout in January. While the program expires in October 2026, the IMF agreement is now a “certificate of confidence” rather than a “life support machine,” Federation of Egyptian Industries board member Mohamed El Bahy tells us. He added that with USD 50 bn investment agreements now on the table, a single IMF tranche is no longer the needle-mover it once was.

Going forward: “Even after the IMF [program] ends, the lessons learned over the last two years have fundamentally changed the mindset of Egyptian economic management. There is now a consensus among the government, experts, and the private sector that rational, stable management is the only way forward,” Genena tells us.

What to watch in 2026:

Where will the EGP trade against the USD this year: Abdel Aal sees an EGP 45–55 range, while Genena is more bullish, projecting an average of 46 EGP;
Interest rate path: Genena suggests that anticipated interest rate cuts in the coming year — potentially up to 800 bps — will not negatively impact the EGP, attributing this to a broader global trend of monetary easing;
The risks: Heavy debt service obligations and the potential for a surge in “non-essential” imports as liquidity improves remain the primary “resistance elements” to further appreciation, Abdel Aal says.

How Egypt’s banks are front-running the easing cycle

The nation’s banks wrapped a blockbuster 2025 by outmaneuvering the Central Bank of Egypt’s (CBE) monetary easing cycle, transforming what could have been a margin squeeze into a windfall. Banks acted swiftly to lower interest rates on deposits and new certificates, cutting expenses. That, combined with the slower pace of rate cuts, allowed banks to sustain high net interest margins (NIMs) throughout 2025 even as interest rates trended downward, industry insiders tell us.

The “spread” strategy: Throughout 2025, the CBE slashed rates by a total of 725 basis points, bringing the overnight deposit rate to 20.00%. Banks acted offensively rather than waiting for cuts:

Cost-cutting: Lenders moved immediately to lower rates on new certificates and deposits;
Yield locking: At the same time, their balance sheets remained packed with high-yield bonds and loans secured during the 2024 interest rate peak;
The result? This “timing gap” allowed banks to maintain outsized NIMs even as the headline rates trended downward.

By swiftly slashing deposit rates while riding high-yield legacy portfolios, banks saw consolidated net income increase to EGP 433.8 bn in the first nine months of 2025 — a massive jump from the EGP 274.9 bn that banks had accumulated at the half-year mark, according to a CBE report. Net operating income in the sector surpassed the EGP 1 tn mark in the nine months ending 30 September, up from EGP 661.1 bn as at the end of June. Net interest income (NII) reached EGP 766.8 bn in 9M 2025, up from EGP 503.6 bn in 6M 2025, highlighting the sector’s ability to leverage current rate levels to maximize returns. Total banking sector assets rose to EGP 25.37 tn, with the total deposit portfolio reaching approximately EGP 15.32 tn at the end of September.

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Why it matters: The record results likely represent the “top of the curve,” economist Hany Abou El Fotouh tells us, with the real test beginning in 2026 as EGP 1.3 tn worth of 27% certificates mature. The “certificate wars” of the past are being replaced by “cheap liquidity wars,” where the winners will be those who can attract low-cost current and savings accounts (CASA) through digital services rather than with expensive interest rates. Banks might be willing to slightly reduce their income to secure and maintain this liquidity, former Industrial Development Bank Chairman Maged Fahmy tells us.

Banks can no longer rely on “easy income” from the differential between what they pay depositors and the income they generate from parking funds in government paper. We’re witnessing the end of “easy arbitrage,” Abou El Fotouh tells us. For years, banks could thrive as mere “deposit collectors,” parking liquidity in high-yield Treasuries. In 2026, that game is over.

Where will the banks try to make up the difference? Interest rates are still at a level that prevents real corporate borrowing for capital expenditure (though that’s expected to improve as the year wears on).

What to watch in 2026:

Companies get more love: With surplus liquidity and lower funding costs, expect a “pricing war” as banks compete to capture high-quality corporate clients;
Diversification: Banks will be pushing to drive revenue from more classical investment banking arms as well as non-bank financial services (consumer finance and ins., among others);
Fees and commissions will likely rise for everything under the sun;
Keep an eye on the rise of green bonds and retail lending — personal loans and credit cards — as banks hunt for higher-margin alternatives to government paper.

Interest payments devour gains as budget deficit widens to 3.6% of GDP

Debt service costs are neutralizing a surge in state tax collection, with interest payments jumping 45.2% y-o-y to EGP 1.06 tn in the first five months of FY 2025-26, according to a recent FinMin report (pdf). These payments accounted for the lion’s share of public spending between July and November, effectively consuming over 96% of the state’s total budget revenues during the period.

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The fiscal tug o’ war: Total expenditure climbed 32.6% y-o-y to EGP 1.88 tn. While interest was the primary driver, the ministry also flagged higher spending on wages — up 9.5% to EGP 263.6 bn — and social protection, which rose 28% to EGP 270 bn due to higher food subsidies and Takaful and Karama transfers. Takaful and Karama are cash-transfer programs that specifically target qualified beneficiaries.

Revenue is also up — but not enough. Revenues grew 33% to EGP 1.1 tn, fueled by a 35% jump in tax receipts to EGP 961.6 bn. The rapid rise in spending, however, more than offset the tax gains, causing the overall budget deficit to widen to 3.6% of GDP, up from 3.1% in the same period last year.

Why it matters: The figures highlight the “fiscal circularity” facing the Finance Ministry even as tax reforms bear fruit. High interest rates mean the government is largely borrowing to pay off old debt. But a “historic” primary surplus — which excludes debt service — jumped to EGP 306 bn. This suggests that if interest rates ease in 2026, the underlying budget would actually be in its strongest position in years.

What’s next: The ministry is working to de-risk the ledger by distributing interest payments more evenly across the fiscal year and diversifying funding sources to move away from high-cost domestic short-term debt.

Garghoub gets SCZone status

The Madbouly cabinet has greenlit the establishment of the Garghoub Special Economic Zone in Matrouh, according to a statement following Thursday’s weekly meeting. The new general authority heading the zone will report directly to the Prime Minister, holding full jurisdiction over 402k feddans to establish companies and enter into public-private partnerships.

By granting Garghoub the special economic zone status, the state is giving it the same perks granted to the Suez Canal Economic Zone — companies operating there will benefit from reduced income taxes, a specialized customs regime for equipment and inputs, and a genuine “one-stop-shop” for licensing.

The big picture: Garghoub is being positioned as Egypt’s western gateway to Europe and this decree provides the legal certainty investors have been waiting for before committing to long-term projects.

Also approved at the cabinet last week

#1- A structural overhaul of the GOEIC: The General Organization for Export and Import Control is being transformed into a comprehensive technical coordinator. Its board will now include heads of the National Food Safety Authority, Customs Authority, and General Organization for Standards and Quality to unify inspection standards and slash customs clearance times.

#2- The cabinet greenlit the agreement between the Egyptian National Railways and Italy’s Arsenale Groupto operate and manage the luxury tourist train Guardian of the Nile, which will offer upscale travel experiences along the Nile Valley. The agreement first came to light in November.

#3- Easy visa extended: To boost off-season tourism, free emergency visas for arrivals at Luxor and Aswan airports will continue through the summer of 2027. The 96-hour free transit visa has also been extended until April 2027.

Suez Canal Authority Chairman Osama Rabie shuffles board for 2026

The Suez Canal Authority welcomed a new board that will lead the waterway through a critical recovery year, according to a statement. Under the decree issued by authority chair Osama Rabie, Fathy Abdel Bary remains Director of Planning, Research, and Studies — a role that has become critical for the SCA’s marketing policies and incentive aimed at luring shipping lines to make their comeback to the waterway.

The new board sees a few faces hold onto their roles, some shuffled around, and a few join it, including Abdelrahman Ramadan, who was named Acting Director of the Transit Department, where he will help manage the return of mega-vessels to the waterway. Meanwhile, Abdelhakim Bedawy is now Director of Affiliated Companies.

Why it matters: This isn’t just an administrative shuffle; it’s a recovery taskforce. By keeping the legal and planning heads in place while switching around the operational and engineering leads, Rabie is betting on a mix of policy continuity and operational efficiency to woo back the global trade that has been diverted around the Cape of Good Hope.

Tax facilitations pull EGP 1 tn into Egypt’s formal economy, says Kouchouk

Finance Minister Ahmed Kouchouk discussed debt and tax in an interview with Hadret El Mowaten’s Sayed Ali last night (watch, runtime: 16:41).

Tax facilities are bringing cash into the light: The ministry’s package of tax facilities is yielding early dividends in formalizing the economy, with over EGP 1 tn in previously “hidden” economic activity reported and EGP 80 bn in tax payments collected as a direct result of these filings.

Tax revenue grew 35% during the first five months of the current fiscal year, matching last year’s growth rate. Kouchouk signaled that the budget deficit is on a steady downward trajectory, forecasting better performance this fiscal year compared to the historical average.

Where’s the long-awaited public debt strategy? The government will hold a press conference in the coming weeks to unveil its comprehensive debt management strategy, Kouchouk said, adding that the strategy will focus on long-term structural debt reduction. He reiterated the Prime Minister’s December pledge to bring external debt down to levels not seen in half a century.

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GRANITE to launch a real estate investment fund

Our friends at GRANITEare planning to launch a real estate investment fund with a target capital of EGP 10 bn by the end of 2026, founder and CEO Hisham Akram told Asharq Business. The fund, which will be set up in partnership with an unnamed developer, will pivot away from traditional residential plays to focus on “ready-to-move” commercial and administrative assets that generate steady rental yields.

The pattern: Fractional real estate is inching toward becoming its own asset class in Egypt, with players including Bonyan, Madine Masr, and Halan approaching the industry from different entry points.

Lenders back Alamein Silicon complex with USD 140 mn loan

Alamein for Silicon Products has secured a USD 140 mn long-term syndicated loan from a group of local lenders, including QNB Egypt, CIB, and Banque du Caire to fund the first phase of its manufacturing complex in New Alamein, according to a statement. The National Bank of Egypt is the financial advisor for the project.

What’s next: The USD 200 mn first phase of the silicon manufacturing and refining complex will have an annual capacity of 45k tons and provide over 3.3k direct and indirect jobs. Future phases will see the production of polysilicon — used in the production of electronics and solar cells — as well as silicone intermediate and finished silicon products, such as rubber and oil. The project will position Egypt as a regional hub for silicon industries and significantly reduce our industrial import bill.

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USD opens 2026 slightly higher, but after its worst annual drop since 2017

The USD opened 2026 with a modest rebound, doing little to repair the damage from last year. The USD index edged up 0.24% on Friday to 98.48, after closing out 2025 with a 9.5% drop — its steepest annual decline since 2017, Reuters reports.

The slide was driven by mounting unease over President Donald Trump’s trade war, surging US debt, and concerns about the independence of the Federal Reserve. “This has been one of the worst years for USD performance in the history of freefloating exchange rates,” Deutsche Bank’s George Saravelos told the Financial Times.

A rebound from a deep hole: The USD hit its low point in September, down 15% against major currencies after Trump launched his sweeping April tariffs. It has since rebounded by 2.5%, as US recession fears eased, though the recovery has been capped by the Fed’s resumption of interest rate cuts, which kept the currency under pressure.

AI saves the day — for now: Capital inflows into US equities tied to the AI boom have provided short-term support, with further investments expected this year — keeping US growth ahead of Europe’s. The reopening of the US government and the impact of recently passed tax cuts could give growth — and the USD — a lift in 1Q, according to Brandywine Global. However, that boost is likely to fade later in the year.

… but the future still looks grim: Markets expect the Fed to deliver two or three quarter-point rate cuts in 2026, while other central banks are expected to hold or tighten policy. The Fed will introduce three rate cuts in 1H 2026, Moody’s Analytics’ Chief Economist Mark Zandi told CNBC, citing a weakening labor market, political pressure, and inflation uncertainty. FX strategists continue to forecast a weaker USD through the year, according to a Reuters survey.

Germany’s fiscal stimulus, policy support in China, and improving eurozone growth are expected to narrow the US growth premium. “When the rest of the world is starting to look better in terms of growth, that’s favorable for the [USD] to continue to weaken,” Amundi’s Paresh Upadhyaya told Reuters.

A pivotal month ahead: Markets are closely watching Trump’s choice for the next Fed chair, expected this month, ahead of Jerome Powell’s term ending in May. Powell has been under fire from Trump for not cutting rates more aggressively, but a successor more receptive to White House pressure could weigh further on the currency. Short-term direction will also hinge on a heavy run of US data next week, including Friday’s payrolls report.

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EGX30	41,829	+0.3% (YTD: +40.7%)
USD (CBE)	Buy 47.60	Sell 47.74
USD (CIB)	Buy 47.61	Sell 47.71
Interest rates (CBE)	20.00% deposit	21.00% lending
Tadawul	10,549	+0.6% (YTD: +0.5%)
ADX	9,995	0.0% (YTD: 0.0%)
DFM	6,114	+1.1% (YTD: +1.1%)
S&P 500	6,858	+0.2% (YTD: +0.2%)
FTSE 100	9,951	+0.2% (YTD: +0.2%)
Euro Stoxx 50	5,850	+1.0% (YTD: +1.0%)
Brent crude	USD 60.75	-0.2%
Natural gas (Nymex)	USD 3.62	-1.8%
Gold	USD 4,330	-0.3%
BTC	USD 91,293	+1.1% (YTD: +4.2%)
S&P Egypt Sovereign Bond Index	994.42	+0.1% (YTD: +0.1%)
S&P MENA Bond & Sukuk	151.69	-0.1% (YTD: -0.1%)
VIX (Volatility Index)	14.51	-2.9% (YTD: -2.9%)

THE CLOSING BELL-

The EGX30 rose 0.3% at Wednesday’s close on turnover of EGP 6.7 bn (22.9% above the 90-day average). International investors were the sole net sellers. The index is up 40.7% YTD.

In the green: Misr Cement (+8.0%), Egypt Aluminum (+3.8%), and Raya Holding (+3.3%).

In the red: Beltone Holding (-3.1%), Oriental Weavers (-1.7%), and Credit Agricole (-0.8%).

CORPORATE ACTIONS-

Domty shareholders approve demerger: The extraordinary general assembly of dairy giant Domty approved a decision to split the firm into two entities based on its book value at the end of 2024, according to an EGX disclosure (pdf). Under the move, Domty will be the demerging company with EGP 113 mn in capital, while a new firm — Dairy Products Euro Arabian for Food Industries — will be created with an issued and paid-in capital of EGP 438 mn.

The split will see total shareholders’ equity of EGP 1.2 bn divided between the two companies, with EGP 246.1 mn allocated to the demerging company and the rest to the new entity. Both companies are set to remain listed on the EGX.

CALENDAR

2026

JANUARY

7 January (Wednesday): Coptic Christmas.

25 January (Sunday): Revolution Day / Police Day.

FEBRUARY

10-12 February (Tuesday-Thursday): Gitex Global’s AI Everything Middle East & Africa Summit

12 February (Thursday): Monetary Policy Committee’s first meeting.

19 February (Thursday): First day of Ramadan (TBC).

MARCH

15 March (Sunday): IMF to hold its seventh review of Egypt’s USD 8 bn EFF arrangement.

21 March: (Saturday): Eid El Fitr starts (TBC).

30 March – 1 April (Monday-Wednesday): Egypt International Energy Conference and Exhibition 2026 (EGYPES)

APRIL

2 April (Thursday): Monetary Policy Committee’s second meeting.

12 April (Sunday): Coptic Easter.

25 April (Saturday): Sinai Liberation Day.

MAY

1 May (Friday): Labor Day.

21 May (Thursday): Monetary Policy Committee’s third meeting.

27-29 May (Wednesday-Friday): Eid El Adha (TBC).

JUNE:

30 June (Tuesday): National holiday in observance of June 30 Revolution (TBC).

JULY

9 July (Thursday): Monetary Policy Committee’s fourth meeting.

23 July (Thursday): National holiday in observance of Revolution Day (TBC).

AUGUST

20 August (Thursday): Monetary Policy Committee’s fifth meeting.

26 August (Wednesday): National holiday in observance of Prophet Muhammad’s birthday (TBC).

SEPTEMBER

15 September (Tuesday): IMF to hold its eighth review of Egypt’s USD 8 bn EFF arrangement.

24 September (Thursday): Monetary Policy Committee’s sixth meeting.

27-29 September (Sunday-Tuesday): Global Conference on Population, Health and Human Development.

OCTOBER

6 October (Tuesday): Armed Forces Day.

29 October (Thursday): Monetary Policy Committee’s seventh meeting.

DECEMBER

17 December (Thursday): Monetary Policy Committee’s eighth meeting.

EVENTS WITH NO SET DATE

Early 2026: Passenger operations on the New Administrative Capital–Nasr City monorail scheduled to begin.

Early 2026: The government will launch the second package of tax breaks.

1Q 2026: Trial operations for the Ain Sokhna–Sixth of October section of Egypt’s first high-speed rail line scheduled to begin.

1Q 2026: Turkish President Tayyip Erdogan to visit Egypt

May 2026: End of extension for developers on 15% interest rates for land installment payments

2H 2026: Operations at Deli Glass Co’s new USD 70 mn glassware factory kick off.

2027

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

April 2027: Tenth of Ramadan dry port and logistics hub to begin operations.

EVENTS WITH NO SET DATE

2027: Egypt to host EBRD’s annual meetings.

2027: Egypt-EU Summit 2027

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

September 2028: First unit of the Dabaa nuclear power plant begins operations.

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