IMF staff-level agreement imminent?

Wednesday, 6 Mar 2024

IMF staff-level agreement imminent?

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Today at a glance

Economy

HSBC’s Simon Willams on why a simple devaluation will not be enough.

What We're Tracking Today

Could we sign a staff-level agreement with the IMF as soon as today?

Economy

Non-oil private sector activity falls to 11-month low on the back of Red Sea disruptions, high inflation.

Economy

Net foreign liabilities hit record high in January for second consecutive month.

A MESSAGE FROM VISA

Payment trends in 2024: Embracing change for a global, seamless future.

EARNINGS WATCH

E-payments giant Fawry’s net income rose 198% y-o-y in 2023.

Economy

Mahmoud Mohieldin shares regional and global outlook at EFG Hermes’ One-on-One conference.

PLANET FINANCE

BTC hits fresh all-time high before tumbling nearly 10%.

HARDHAT

Egypt should start moving more of its cargo via trains — here’s why.

What We're Tracking Today

Could we sign a staff-level agreement with the IMF as soon as today?

Good morning, wonderful people, and welcome to what might well be IMF Day. We have little detail to report, but three sources we trust told us overnight that a staff delegation from the International Monetary Fund is in town.

Will we see an agreement today? One of the three, who has proven exceptionally reliable over the long term, tells us that the IMF will sign a staff-level agreement with Egyptian officials as early as today.

It’s still not clear what a package would look like, but policymakers had been pressing in January for something in the USD 10 bn range, with as much of that as possible front-loaded. The IMF, meanwhile, was asking for a full float and was pushing to tie much of the funding to our meeting reform milestones, whether on economic reforms or social protection.

Could we see devaluation happen today? That’s totally unclear. On the one hand, there is no rule that says we must devalue before signing an agreement. On the other, the IMF — like many in our community — is pushing hard not for devaluation, but for a float. For the “enduringly flexible” regime policymakers had previously promised.

USD 8-10 bn (or any number, really) from the IMF would be very nice to have. But it’s no longer critical. As HSBC’s Simon Williams says in this morning’s news well (below), it’s much less about the capital now that we have lined up a transaction of the size of Ras El Hekma, it’s about continued emphasis on policy reforms to make sure we don’t come full circle in three to four years’ time. The IMF, as we’re previously said, is the ideal actor to ensure that we learn the right lessons from this crisis — and take steps to ensure it doesn’t happen again.

We’ll have the update for you in EnterprisePM this afternoon and, as always, will report back tomorrow morning.

DATAPOINT-

Net foreign reserves inched up by USD 6 mn to USD 35.31 bn at the end of February, compared to USD 35.25 bn in January, according to central bank figures. The coming months should be set to tell a very different story, as we wait and see how — and to what extent — fresh funds from ADQ’s landmark Ras El Hekma project and other agreements in the works will reflect on the central bank’s net foreign reserves.

PSA-Vodafone technical hiccup resolved: 4G and mobile network services from Vodafone are now up and running across the country as normal after network updates early yesterday morning triggered a temporary service outage, Vodafone told Enterprise.

Making it up to customers: Vodafone will gift affected users calls and internet for 24 hours for all packages as compensation for the outage, the telecoms company said on its social media channels.

It wasn’t only Vodafone that had tech issues yesterday, asMeta’s social media platforms Instagram and Facebook were down across the globe for nearly two hours yesterday due to a technical issue. The US’s National Security Council was not aware of the outage as being part of deliberate cyber attack, but is looking into the interruption, according to a spokesperson cited by Reuters.

WATCH THIS SPACE-

Ras El Hekma airport already in the works: The government has begun shortlisting potential sites for the airport that will serve the city of Ras El Hekma, Prime Minister Moustafa Madbouly said yesterday during a meeting with UAE investment minister and ADQ CEO Mohamed Al Suwaidi aimed at following up on progress made in the Ras El Hekma project, according to a cabinet statement.

A ministerial committee and secretariat to oversee the project are also in the pipeline:The government has also begun to form a ministerial committee to oversee the project that will be headed by Madbouly. The committee will be tasked with streamlining procedures, addressing hurdles, and facilitating collaboration between the involved authorities. A technical secretariat will also be formed and headed by First Assistant to the Prime Minister Randa Al Minshawi, which will be responsible for drafting key decisions.

HAPPENING TODAY-

It’s the penultimate day of the EFG Hermes One on One Conference, the largest gathering of its kind devoted to emerging and frontier equities.

Some 670 investors from 250 global institutions are meeting face-to-face with senior execs from more than 215 companies in industries through Thursday. Presenting companies are from industries ranging from food and fintech to banking and petrochemicals. Companies from 29 countries will be attending.

We have coverage of the opening session from day one of the conference, which featured an interview with our friend Mahmoud Mohieldin, the UN Special Envoy on Financing the 2030 Agenda for Sustainable Development and an executive director at the International Monetary Fund. We will have more coverage from the gathering in the days ahead.

** If you’re in Dubai and want to have coffee or pitch us on an interview, hit us up on 1x1@enterprisemea.com.

SIGN OF THE TIMES-

Starbucks to lay off 2k workers in the MENA region after consumer boycott hits sales: Kuwaiti retail conglomerate Alshaya Group plans to cut over 2k jobs in its Starbucks franchise in the Middle East and North Africa as boycotts triggered by Israel’s war on Gaza continue to hobble the business, Reuters reports, citing people familiar with the matter. The layoffs reportedly account for some 4% of Alshaya's total workforce of almost 50k.

ICYMI: Alshaya in January said it will be scaling back operations in Egypt on the back of FX pressure and difficult economic conditions, with Debenhams, The Body Shop, Mothercare, and Pinkberry leaving Egypt.

THE BIG STORY ABROAD-

Three days of Gaza ceasefire talks fail to reach breakthrough, as negotiators from Egypt, Qatar, the US, and Hamas met for a third day in Cairo yesterday to try and secure a six-week pause in time for Ramadan, the Associated Press quotes Egyptian officials as saying.

No economic slump here, says China: The Chinese government is out with an ambitious 5% GDP growth target for 2024, despite a property and debt crises coupled with a slower-than-expected post-covid recovery. But, not everyone’s so optimistic, including the IMF, that currently forecasts China’s growth slowing down from 5.2% in 2023 to 4.6% in 2024 and 3.5% by 2028. (Reuters | Bloomberg | Associated Press)

WHILE IN THE US- Get ready for Super Tuesday being the only thing the US press talks about for the next few days: Voters in 16 US states and one US territory have mostly wrapped up voting for which Republican or Democratic presidential candidate they want to be their party’s nominee. With few pundits doubting that Trump and Biden will both sail to overwhelming victories, the fourth estate is asking if Super Tuesday will be Republican challenger Nikki Hailey’s last stand. (Reuters | Associated Press | Washington Post | New York Times | Wall Street Journal | Axios)

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: We look at the benefits and challenges of moving cargo around the country via railways instead of trucks.}

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devaluation IMF What We're Tracking Today

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Economy

HSBC’s Simon Willams on why a simple devaluation will not be enough

Egypt has the chance to turn the corner, says veteran Egypt watcher Simon Williams, HSBC’s chief economist for CEEMEA: “This is one of those rare moments of genuine opportunity. With the right policy choicesin the coming weeks and months, the economy stabilizes before year-end and recovery comes into view. The pain of the last few months has made it easy to forget what a strong underlying story Egypt still is — get conditions right, then Egypt is a 6% growth story over the medium term, driven by much higher exports of goods and services, stronger private investment, and higher FDI.”

The catch: We need to get things right in the coming weeks — and stay the course with policy stability if we want to get to the other side.

“The shift in the outlook triggered by the scale and terms of the ADQ investment is clear, but the IMF agreement is still critical. That’s partly to bring in more funding, but mostly to set a policy anchor, a policy framework that can give onshore and offshore confidence in what lies ahead. And I still think that policy shift starts with FX liberalization, higher interest rates, and fiscal tightening,” Williams tells us.

The concern among many in our community is simple: Absent a significant tightening of fiscal spending and a wholesale effort to include the private sector in the economy, we run the risk of finding ourselves having gone full circle in three to five years’ time.

“Just from the conversations I’m having, I know that interest in Egypt is currently broad and exceptionally strong,” William says. “And the volatility in market pricing tells you we’re all trying to gauge where we are in the adjustment story. A large, clearly structured IMF programme would be a powerful signal that this really is an inflection point.”

The international interest in Egypt that Williams is seeing meshes with reports from other big-name banks and analysts, who have been poking into the Egypt story with more depth and frequency in the past couple of weeks — both remotely and on the ground.

Seeing privatization through the right lens is also key, Williams says.

“Privatization was not primarily about generating USD, it was about reducing the role of the state in the economy,” he notes. “I see the new focus on public capital spending — both on and off-budget — as an effort to deliver the same thing.”

Should we expect a full float or a managed devaluation? “I don’t think a simple devaluation would be enough for anyone. It’s going to take time to rebuild confidence, and without a currency that flexes, investors who do come in will be staying close to the door.”

The first big installment of the USD 24 bn that ADX is paying for the development rights to Ras El Hekma means policymakers will likely have leverage as talks with the IMF come to a close. It goes back to the old adage that banks are happiest lending to people who have no pressing need to take on more money. But the IMF’s seal of approval on a reform program is something that most in our community would like to see.

How bad will the inflationary bump be if we float? We’ve long held that for consumers and many private-sector businesses, the new FX rate is already priced in. Williams shares our view that a float won’t be horrible for many companies (though it would obviously put pressure on the state to come up with the liquidity it needs to finance key imports).

The question today is one of availability much more than it is price — particularly with the greenback going for EGP 44-45 on the parallel market and 12-month non-deliverable forwards suggesting we’re looking at something in the 52 range a year from now.

“Unifying the FX rate at 40-45 would be an appreciation for most households and corporates,” given where the parallel market was just a few weeks ago, says Williams.

HSBC has left its outlook on the EGP unchanged, with Williams saying he expects something in the EGP 40-45 range from EGP 30.95 today.

Will we see an interest rate hike on D-Day? Williams thinks so, though he agrees there may be room for the central bank to be more modest with the hike than there was pre-Ras El Hekma, when some pundits were saying we’d need to see the central bank make a 400 bps move.

Signs Williams will be watching for after the float:

Will remittances return? They were down 30% year-on-year in 2023 as Egyptians abroad held onto their cash or sent it back through parallel mechanisms.
Do portfolio investors move from hard currency debt to local assets? Egypt is understandably keen to avoid relying on hot money, but inflows would signal market confidence and bring liquidity.
Will corporates and households de-dollarize? A credible rate may see them move to lock in the appreciation of their EGP assets.

Tags:

economy exchange rate HSBC

Economy

Mahmoud Mohieldin shares regional and global outlook at EFG Hermes’ One-on-One conference

UN Special Envoy on Financing the 2030 Agenda for Sustainable Development and IMF executive director Mahmoud Mohieldin took to the stage on the first day of EFG Hermes’ One on One conference in Dubai to offer his macroeconomic outlook on the global and regional economies for the next couple of years. The conference, which welcomes some 670 investors and 250 global institutions to meet with senior execs from more than 215 companies from 29 nations, runs through to tomorrow.

“The center of economic gravity is shifting towards the East,” Mohieldin, who is also the UN Special Envoy on Financing the 2030 Agenda for Sustainable Development, told attendees, pointing to countries like China, India, Vietnam, and the Philippines. It’s up to emerging markets and countries in the Middle East — which are strategically located to benefit from that shift — to make the most of that transition, he added. Regional cooperation is important in the increasingly fragmented global economy that we currently live in, he said, adding that “better trade relations and FDI in the region” will allow these markets to grow without constraints.

Navigating a restricted and fragmented trade environment is the uphill battle emerging markets will have to reckon with over the next couple of years, Mohieldin said. “It’s a sad fact that last year, 3k trade restrictions is 3x more than what we had in 2019,” he said. “All emerging markets are dependent on a globalized economy with trade flows, FDI, and knowledge sharing — that is not the case anymore,” he added.

We’re not on track to achieve any of the sustainable development goals (SDGs): Of the 17 goals, we’re only on track to achieve 15%, and we’re deviating either slightly or significantly on 50% of the goals, Mohieldin said.

For Egypt, the long-term view is paramount: To achieve real sustainable growth that can help us reach milestones like celebrating the end of extreme poverty, we need to maintain growth of no less than 7% over two decades, Mohieldin said. The growth must be inclusive and based on continuous investment, which churns out more opportunities, he said. And while Egypt’s immediate economic hurdles “will be dealt with shortly,” the long-term view “should be about policies beyond transactions. What I hope to see is a full-fledged inflation targeting policy with monetary policy being just one tool of many,” he said. “The center of economic policy being the exchange rate is wrong,” and should be shifted to inflation targeting.

For GCC countries, expanding the non-oil sector is paramount: “There have been good attempts at diversification, and the name of the game is how to diversify better,” Mohieldin said. “Some have the ability to do that and have diversified into services and high tech and investments at home and abroad, [and] some have great ambitious infrastructure plans, like Saudi Arabia, and are benefiting from a well educated caliber of the young population,” he explained, referencing the UAE.

And EMs need to keep debt in check: “We’re not going to see a global debt crisis like the 1970s, ‘80s, and ‘90s. The kind of debt today and the limited exposure of financial institutions won't make it a global crisis,” he said. “[But] we’ll see a development crisis; we’ll see scattered fires in different places,” Mohieldin added. “Many countries today in Africa and South Asia are paying on their debt service more than what they pay on education and health,” he noted, adding that the high cost of borrowing — along with muted FDI flows and inadequate domestic savings — are hampering investments and growth in emerging markets.

…which involves setting up a common resolution mechanism: “If you’re in debt trouble and you’re in an economy without significant spillovers to the rest of the world, you’re on your own with very little support from the global financial system,” Mohieldin said, adding that many countries in Africa and South Asia are paying more on debt service than on essential services like education and healthcare. “The world right now doesn’t have a good resolution mechanism; it’s too slow and doesn’t work,” he said.

Things could take a turn when interest rates go down: Anticipated rate cuts from the US Federal Reserve will be “good news” for capital flows and potential penetration in emerging markets’ capital markets, Mohieldin said.

But more needs to be done: “We need to learn from past mistakes [and] avoid excessive borrowing,” he said, adding that we need more equity-based financing. We also need to develop an encouraging business environment, and ensure good coordination between fiscal and monetary policy, while also capturing the potential of the green transition and big data and AI, he added.

And we must be mindful of the impacts of laws in the US and the EU on our part of the world, he added, referencing the US’ Inflation Reduction Act — which involves providing subsidies in the form of tax credits to renewable energy projects — and the EU’s carbon border adjustment mechanism (CBAM), which taxes imports of certain raw materials in a bid to reduce greenhouse gas emissions.

Tags:

debt economy EFG Hermes inflation Mahmoud Mohieldin

Economy

Egypt’s PMI falls to 11-month low in February on the back of Red Sea disruptions, high inflation

Business activity saw “solid deterioration” in February: Egypt’s non-oil private sectoractivity contracted at its sharpest rate in over a year last month as inflationary pressures have continued to dampen domestic demand and Red Sea shipping disruptions have taken their toll on Suez Canal revenue, exacerbating the FX shortage, according to S&P Global’s Egypt Purchasing Managers’ Index (pdf )

In numbers: The index fell to 47.1 in February down from 48.1 in January, logging an 11-monthlow and remaining below the 50.0 threshold that separates growth from contraction for the 39th straight month.

Caught in the middle of the wider Middle East crisis: “Red Sea shipping disruption hasroughly halved Suez Canal revenues so far in 2024, which February PMI survey data indicated had a considerable impact on foreign currency inflows and inflationary pressures,” S&P Senior Economist David Owen wrote. Disruptions have also hindered supplier delivery times, which have seen their longest delays since June 2022.

Refresher: Suez Canal receipts fell 47% y-o-y to USD 428 mn in January as the number ofships passing through the waterway dropped almost 37% to 1.4k thanks to Houthi attacks on vessels passing through the Red Sea.

Tourism has also taken a hit: There are indications from correspondents that Israel’s war on Gaza has hit Egypt’s tourism activity, Owens added. That being said, tourist arrivals in the first 40 days of the year were up 5% from the same period last year.

Higher prices, lower demand: Rising prices and dampened demand across all monitored sectors drove new orders to fall at their fastest rate since March 2023. “More than a third of surveyed companies saw their purchasing costs increase over the month, with most comments linking this to rising USD values on informal markets,” Owen wrote. Businesses opted to pass the rising cost burdens onto their customers, pushing input and output price inflation to the highest level in 13 months.

Businesses still expect a bumpy road ahead: Surveyed companies gave a “relatively subdued” forecast for business activity over the coming 12 months, with workforce numbers falling at their quickest pace since October. “The latest results signal that [Egypt’s headline inflation rate] could reaccelerate in the near future … Faster cuts in employment and purchasing suggest [firms] are planning for a prolonged reduction in output,” Owen said.

The report also got ink from Reuters.

FROM THE REGION-

Saudi growth bounces back: Output and new order growth led Saudi Arabia’s PMI torebound at its fastest rate in five months to 57.2, after hitting a two-year low of 55.4 in January, according to its PMI (pdf ).
UAE maintains growth run: The UAE’s non-oil economy continued to see “strongupwards momentum” as output levels rose at their sharpest rate since mid-2019. The country’s PMI recorded 57.1 in February, up from 56.6 in January, S&P’s PMI (pdf ) showed.

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economy inflation PMI S&P Suez Canal tourism

Economy

Egypt’s net foreign liabilities hit record high in January for second consecutive month

Egypt’s net foreign liabilities reached an all-time high in January as pressure on thecountry’s external position continued to mount. Net foreign asset deficit widened for the second consecutive month to USD 29.0 bn from USD 27.2 bn in December, according to Enterprise calculations based on Central Bank of Egypt figures.

Once again, commercial banks brought the overall figure down, with their net foreign asset position worsening for a second consecutive month to a deficit of USD 17.6 bn in January, from a deficit of USD 16.2 bn in December.

But so too did the central bank after having improved the month before. The central bank’s net foreign asset position worsened to a deficit of USD 11.4 bn in January, from USD 11.0 bn in December.

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Central Bank of Egypt economy foreign exchange

A MESSAGE FROM VISA

Payment trends in 2024: Embracing change for a global, seamless future

Brace yourselves, because the payments game is about to go global, open, tailored, and interoperable in 2024. This year is shaping up to be a game-changer, flipping traditional norms on their head and ushering in a new era of innovation and accessibility in the payments industry.

Global expansion: Gone are the days when businesses were confined to their local markets. From creators to small- and medium-sized businesses (SMBs), everyone's eyeing the global stage and consumers are readily embracing the change. With nearly four in five SMBs focusing on selling across borders, and consumers increasingly comfortable with cross-border transactions, digital payments are the gateway to new opportunities.

Interoperability revolution: Say goodbye to the fragmented landscape of payment networks. Interoperability is the name of the game in 2024, whether you're using a money-moving app, a blockchain platform, or traditional infrastructure. Collaboration across the payments ecosystem is key, promising a future where cross-border transactions are smoother than ever.

Open Infrastructure: Flexibility is key in the payments world of tomorrow. Modular, platform-agnostic infrastructure is making it easier for businesses to adapt to consumer demands. Need a token solution? Want to enhance your omni-channel experience? No problem. With network-agnostic payment services, businesses can tackle complex challenges without overhauling their entire setup.

Consumers expect tailored solutions: Today's consumers demand personalized experiences, and businesses are racing to meet these expectations. Partner-based solutions and managed services are bridging the gap, providing tailored experiences without the hefty investment in new capabilities.

AI brings new opportunities — and challenges — to payments: The rise of AI presents both promise and peril in the fight against fraud. While AI tools offer unprecedented insights, they also pose new challenges, requiring businesses and consumers to adapt to an evolving threat landscape.

Travel returns with a vengeance: With the shadow of the pandemic receding, travel is back in full swing. Flexibility and safety are top priorities for travelers, along with touch-free payment experiences. Sustainable travel is on the rise, driven by initiatives like Visa's partnership with Ecolytiq and the Travalyst initiative.

Change is in the air, and if it means a world where businesses thrive, consumers are satisfied, and innovation reigns supreme, count me in for the ride.

This op-ed was written by Leila Serhan (Linkedin), senior vice president and group country manager for North Africa, Levant, and Pakistan at Visa.

**Want to go deeper? Click or tap here to find out more about Visa's insights on payment trends in 2024.

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A MESSAGE FROM VISA Fintech Leila Serhan Visa

EARNINGS WATCH

Egyptian e-payments giant Fawry’s net income rose 198% y-o-y in 2023

A record year for Fawry: EGX-listed e-payments giant Fawry saw its net income grow 198%y-o-y to EGP 715 mn in 2023, the company said in a press release (pdf ). The company saw its top line grow 44% y-o-y to a record EGP 3.3 bn, driven by a strong performance in its banking services.

Driving the growth: Fawry’s banking services division — which contributed 50% of the firm’srevenue growth for the year — saw its revenues jump 66% y-o-y in 2023 to EGP 1.3 bn. Revenues from its supply chain business surged 76% y-o-y to EGP 226 mn during the same period and from its financial services segment grew by 60% y-o-y to EGP 426 mn.

On a quarterly basis: Fawry saw its revenues grow nearly 47% y-o-y to EGP 955 mn, while its net income nearly doubled to EGP 228.8 mn.

More transactions: Fawry’s transaction throughput value was up 70% y-o-y to EGP 348 bn forthe year, meanwhile transaction volumes climbed 22% y-o-y to 1.6 bn.

What they said: “Amidst the challenges posed by the prevailing market conditions, includingrecord inflation and supply chain disruptions, we successfully navigated through by implementing vigilant cost control measures and adopting a synergistic approach to business development. As such, the strong expansion in our top-line performance was complemented by effective cost optimization strategies, resulting in robust profitability,” said CEO Ashraf Sabry.

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earnings watch Fawry Fintech

LAST NIGHT’S TALK SHOWS

Global Facebook and Instagram outage caught the interest of the nation’s talking hosts

The nation’s talking heads last night zeroed in on the gremlins that hit Meta’s social media platforms yesterday. Forecasts of a drop in cigarette prices after the Eid holidays also got coverage on the airwaves.

The outages at Facebook and Instagram got hosts and pundits talking, and gave Masaa DMC host Osama Kamal the perfect excuse to delve into memes posted by rival social media network X owner Elon Musk “gloating” over the outage (watch, runtime 1:35). Kamal also pointed to another post by Musk stating “If you’re reading this post, it’s because our servers are working,” before covering working theories of why Meta’s sites were down — spanning from potential cyber attacks, the cutting of subsea cables, and Facebook’s own explanation that it was a technical malfunction. IT experts also phoned in to explain the causes of the outage on Kelma Akhira (watch, runtime: 8:49), Salet El Tahrir (watch, runtime: 5:59), and Yahduth Fi Masr (watch, runtime 4:12).

Cigarette prices are expected to fall following the Eid holidays, Eastern CEO Hany Aman said in a phone call with Kelma Akhira’s Lamees El Hadidi (watch, runtime 9:35). Cigarette prices on the black market have already dropped to EGP 33 from EGP 60, approaching the official price of EGP 30, he said. Aman expressed confidence that the parallel market will completely fizzle out within two months, seeing as the company is now covering market demand and has received shipments of raw materials worth USD 400 mn.

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Also on our Radar

Gov’t awards 11 concessions for gas exploration in the western Mediterranean. PLUS: Shelf Drilling, Sabbour Consulting, Sky Developments

ENERGY-

#1- Freshgas exploration in the Med: The government has awarded 11 concessionsto five international energy players to explore for natural gas in the western Mediterranean region, the Arab World Press reported, citing an unnamed industry source. The companies are BP, ExxonMobil, TotalEnergies, Chevron, and Shell, while Abu Dhabi’s sovereign wealth fund Mubadala will partake via an indirect agreement with one of the primary companies. Exploration is scheduled to start between the end of 2024 and the beginning of 2025.

#2- Shelf Drilling’s oil contract extended: Dubai-based offshore drilling contractor Shelf Drilling was awarded a USD 51 mn, two-year contract extension for an oil rig in the Gulf of Suez with Egypt’s Gemsa Petroleum, according to a statement (pdf) from Shelf. One year of the extension will be farmed out to Petrogulf Misr — a JV between the Egyptian General Petroleum Company, the Kuwait Foreign Petroleum Exploration Company, and Cheiron.

SOUND SMART- A farmout agreement allows a third party to acquire an interest in an oil or a gas asset for development and gets paid a sum of money or receives royalties for the work it performs in the asset.

REAL ESTATE-

Sabbour Consulting eyes big projects in KSA: Engineering consulting firm Sabbour Consulting is studying four potential projects in Saudi Arabia, whose construction will cost nearly SAR 3 bn, the company’s CEO Omar Sabbour told Al Borsa. The projects include a residential compound for SAR 600 mn, residential towers for SAR 400 mn, a tourist resort for SAR 450 mn, and a residential project in the Neom development costing SAR 1.5 bn.

DEBT-

Banque Misr, Emirates NBD Egypt to fund a Sky Developments project: Sky Investments’ real estate arm Sky Developments has secured a nine-year syndicated loan of EGP 3.1 bn from Banque Misr and Emirates NBD Egypt to finance part of its New Cairo mixed-use development Park St. East, according to a statement (pdf). The development, set to be similar to its Sheikh Zayed Part St. project, will cost a total of EGP 4.2 bn.

Tags:

ALSO ON OUR RADAR Banque Misr BP Chevron Emirates NBD ExxonMobil Green Economy oil and gas real estate renewable energy Shell Sky Investments solar power TotalEnergies

PLANET FINANCE

BTC hits fresh all-time high before tumbling nearly 10%

BTC ends month-long rally with record-high price: The world’s largest cryptocurrency surged to a record high yesterday, driven by strong demand for new spot exchange-traded funds and the expectation that global interest rates will fall later this year, Reuters reports. BTC hit USD 69.2k — its highest level since its last peak of USD 69k in November 2021.

But nothing lasts forever, especially on the notoriously volatile BTC market: After surpassing its previous record yesterday at around midday CLT, the price of BTC tumbled by 9% as of midnight last night. Throughout the whole 24-hour period, the cryptocurrency fell 6.2%.

It’s been a good few months for BTC: The cryptocurrency has already jumped 47.8% since the beginning of the year and is up a whopping 181% since the same time last year.

MEANWHILE- Asian markets are in the red this morning, with CNBC noting that markets are “tracking Wall Street’s slide” in early trading as “Apple suppliers drop on declining iPhone sales in China.” Futures were mixed overnight, suggesting a soft open for Wall Street and Europe later today.

EGX30	30,669	+0.4% (YTD: +23.2%)
USD (CBE)	Buy 30.83	Sell 30.96
USD at CIB	Buy 30.85	Sell 30.95
Interest rates CBE	21.25% deposit	22.25% lending
Tadawul	12,470	+0.3% (YTD: +4.2%)
ADX	9,236	-0.5% (YTD: -3.6%)
DFM	4,246	-1.9% (YTD: +4.6%)
S&P 500	5,079	-1.0% (YTD: +6.5%)
FTSE 100	7,646	+0.1% (YTD: -1.1%)
Euro Stoxx 50	4,893	-0.4% (YTD: +8.2%)
Brent crude	USD 82.04	-0.9%
Natural gas (Nymex)	USD 1.95	-0.3%
Gold	USD 2,141.90	+0.7%
BTC	USD 63,210.57	-6.2% (YTD: +47.8%)

THE CLOSING BELL-

The EGX30 rose 0.4% at yesterday’s close on turnover of EGP 8.4 bn (90.1% above the 90-day average). Regional investors were net sellers. The index is up 23.2% YTD.

In the green: Elsewedy Electric (+20.0%), Delta Sugar (+3.8%), and EFG Holding (+3.5%).

In the red: Talaat Moustafa Group (-4.8%), Egypt Kuwait Holding (-4.7%), and Alexandria Container and Cargo Handling (-4.4%).

CORPORATE ACTION-

#1- OFH taps Prime Capital to advise on B Investments acquisition: OrascomFinancial Holding (OFH) has appointed Prime Capital as its financial advisor on B Investments’ bid to acquire up to 90% of the company via a share swap, it said in a bourse disclosure (pdf). Prime Capital will conduct a fair value study of the offer — evaluating both parties’ shares — and present it to OFH’s shareholders before 10 April — 5 days before B Investments' mandatory tender offer expires.

#2- Eastern Company’s board approves capital increase: State-owned tobaccomanufacturer Eastern Company’s ordinarygeneral assembly has approved increasing the company’s issued capital to EGP 3 bn from EGP 2.2 bn and its authorized capital to EGP 15 bn from EGP 3 bn, the company said in an EGX disclosure (pdf).

Also approved: The assembly also approved a USD 400 mn credit facility from local banks,which will go towards opening up letters of credit to the company’s suppliers and a USD 200 mn credit agreement with foreign banks to unlock letters of guarantee.

Tags:

Financial Markets Planet Finance

HARDHAT

Egypt should start moving more of its cargo via trains — here’s why

The fault in our railways: Egypt’s railway network has a total length exceeding 10kkms, linking lower and upper Egypt — more than half (60%) of the network is concentrated in the Nile Delta. Yet, only a mere 2% of the country’s freight is transported by rail, with 96% of the country’s cargo moving on trucks, according to World Bank calculations.

By the numbers: Railways currently move an average of 5.5 mn tons of cargo a year thanks tosteps taken to modernize the network and the addition of new trains, sources in the transport sector told us. The figure can double if the state adds more freight trains to its fleet, which will help the Madbouly government reach its goal of moving 30 mn tons of cargo a year by 2030.

Why does it matter? Using railways to move freight comes with a wide array of advantages.

Trains can transport larger volumes compared to trucks, making them a morecost-effective solution for transporting large volumes of bulk commodities over long distances.
Trains are four times more fuel efficient than trucks, which can help make trains a cheaper alternative to transporting goods by road.
Lower maintenance cost: Trains, in comparison to trucks, can travel for long distanceswith less maintenance. The reliance on trains also reduces the use of roads, reducing wear and tear caused by heavy trucks.

Increasing reliance on trains is also better for our green aspirations: Rail transport isgenerally more fuel-efficient than road transport, especially over long distances, which results in lower emissions per ton-mile of cargo transported. It also helps reduce the number of trucks on the road, which can alleviate traffic congestion and decrease the associated emissions and fuel consumption from idling in traffic.

But, trucks do have some advantages: Trucks are more flexible as they don’t abide by a specific schedule, theyalso have a “wider and more accurate coverage.”

So, what’s standing in Egypt’s way to boost reliance on rail transport? The lack of regulationsplays a key role in the low volumes of cargo transported by trains, pushing the private sector to lean towards trucks. The railway network is also fairly limited in the number of trains it can accommodate — the railroad linking the Port of Alexandria’s and the Sixth of October Dry Port can only accommodate three freight trains in each direction a day.

Egypt owns the region's most extensive and historic railway network, two officials in therailway sector told Enterprise. They explained that the little attention the state is paying to the country’s trains despite their old age has led to a notable shift towards road and maritime freight solutions.

What is the government doing on this front? The government is simultaneously upgrading itsports, while creating connections between them — this includes leveraging communication technologies through an expansive network encompassing roads, bridges, railways, dry ports, and logistic zones, the sources added.

If it all comes together, it would mean more efficient local supply chain networks: Thegovernment's strategy aims to streamline the flow of goods by cutting back on the time ships spend in maritime ports, the sources told us. The vision is to transform seaports into mere transit points and dry ports to serve as the ultimate destinations for goods.

The details: This setup is expected to feature adjoining logistic zones — designed forcomprehensive services including packing, wrapping, manufacturing, and distribution — to nearby industrial regions. The move is expected to reduce cargo loss, speed up the process, and consequently drive down the cost of the final products.

The plan: The Sokhna-Alexandria high-speed rail line— a critical component designed toenhance efficiency, with its first leg being referred to as “Suez Canal on tracks” — is currently 60% complete, another source at the transport sector source told us. This project also entails setting up commercial and logistical zones, serving the rail line. This network will primarily facilitate the transport of goods to all parts of the country.

The FX crunch has hindered the plan: The USD shortage is a big issue for the Sokhna-Alexandria line that has caused significant delays, but prearranged contracts for new trains, coupled with funding from international development finance institutions have propelled the project’s progress, according to a source.

Remember: We got USD 400 mn in funding from the World Bank in 2022 to develop a railcorridor that allows freight trains to move between the Port of Alexandria and the Sixth of October Dry Port via an alternative route to the west of Greater Cairo. This link is expected to handle 15 container trains per day by 2030 and up to 50 trains by 2060.

Private sector to the rescue? There is a push towards segregating freight from passenger railservices by handing it over to the private sector, a source at the Transport Ministry told Enterprise. The private player contracted would also take care of the trains’ refurbishment. Despite floating the notion of a medium-term private concession to take over train operations and infrastructure utilization, the plans are yet to materialize, the source added.

Tags:

Hardhat infrastructure logistics Transport Ministry

CALENDAR

2024

MARCH

4 - 7 March (Monday - Thursday): EFG Hermes One on One conference, JW Marriott Hotel Marina, Dubai.

7 March (Thursday): Deadline to apply to Shalateen Mining Company’s international gold exploration tender.

10 March (Sunday): First day of Ramadan (TBC).

20 March (Wednesday): End of sugar export ban.

28 March (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

28 March (Thursday): Industrial Development Authority to close applications for 1 mn sqm of land in 10 different governorates.

29 March (Friday): Egypt removed from JPMorgan Chase’s Emerging Local Markets Index Plus.

APRIL

1 April (Monday): Deadline to bid for 23 blocks in an international oil and gas tender.

9 April (Tuesday): Eid El Fitr (TBC) (national holiday).

15-21 April (Monday-Sunday): The IMF / World Bank Spring Meetings.

25 April (Thursday): National holiday in observance of Sinai Liberation Day (TBC) (national holiday).

28 April (Sunday): Grace period to ins. brokerage firms to comply with Law 215 for 2023 expires.

28-29 April (Sunday-Monday): Saudi Arabia hosts a World Economic Forum (WEF) meeting on ‘global collaboration, growth, and energy.’

29 April (Monday): The government’s car export scheme expires.

MAY

1 May (Wednesday): National holiday in observance of Labor Day (TBC) (national holiday).

5 May (Sunday): Coptic Easter.

6 May (Monday): Sham El Nessim (national holiday).

20 May (Monday): Malaysian Palm Oil Forum in Cairo, with attendance from Malaysian Plantation and Commodities Minister Johari Abdul Ghani.

23 May (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

29 May (Wednesday): Virtual launch of Chicago Booth Executive Program.

JUNE

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

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

JULY

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

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

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

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.

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

NOVEMBER

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

DECEMBER

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

EVENTS WITH NO SET DATE

January 2024: The Red Sea Ports Authority is set to finalize an agreement with the Abu Dhabi Ports Group for the operation and maintenance of the tourist passenger terminal in the Sharm El Sheikh Sea Port.

February 2024: Egypt will sign a USD 1.5 bn financing agreement with the International Islamic Trade Finance Corporation (ITFC).

February 2024: Funds from the Islamic Development Bank for the high speed electric railway will get the sign off.

April 2024: President Abdel Fattah El Sisi will visit Turkey.

1Q 2024: Egyptian-Qatari Joint Supreme Committee.

1Q 2024: Opening of the newly developed Pyramids Plateau in Giza.

1Q 2024: The government is set to finalize the sale of the Gabal El Zeit wind farm.

February-May: The Grand Egyptian Museum could officially open to visitors.

March 2024: The USD 2.7 bn MIDOR Refinery is set to begin full operations.

May 2024: Arab Finance Ministers’ meeting at Egypt’s administrative capital.

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.

1H 2024: The European Union is set to hold an investment conference in Egypt during spring.

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

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.

2025

EVENTS WITH NO SET DATE

2Q 2025: Safaga Terminal 2 to start operations.

2027

EVENTS WITH NO SET DATE

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

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