{"id":576862,"date":"2022-11-01T04:00:05","date_gmt":"2022-11-01T04:00:05","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2022\/11\/01\/this-morning-imf-gives-egypt-kudos-for-devaluation-as-egp-appears-to-bottom-out-against-the-greenback\/"},"modified":"2022-11-01T04:00:05","modified_gmt":"2022-11-01T04:00:05","slug":"this-morning-imf-gives-egypt-kudos-for-devaluation-as-egp-appears-to-bottom-out-against-the-greenback","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2022\/11\/01\/this-morning-imf-gives-egypt-kudos-for-devaluation-as-egp-appears-to-bottom-out-against-the-greenback\/","title":{"rendered":"THIS MORNING: IMF gives Egypt kudos for devaluation as EGP appears to bottom out against the greenback"},"content":{"rendered":"

Good morning, friends, and welcome to the first day of November. <\/strong>We feel we ask this every year, but: Where the hell has 2022 gone? The Colonel was right: Time accelerates as you age.<\/p>\n

We\u2019re really looking forward to having breakfast this morning with 20 bold-name CEOs <\/strong>to discuss our focused, five-point plan to build a new Egyptian economy<\/a> that is export-led and can turn us into a magnet for foreign direct investment. We\u2019ll be talking lots more about this once we get over the hump of COP27, which is going to keep all of us very busy in the couple of weeks to come.<\/p>\n

Also this morning: We\u2019ve got the results of our Enterprise Reader Poll on your appetite <\/strong>for electric vehicles <\/strong>(EVs), where we found one in five of you intend to buy an electric car in the next 12 months. Check out this morning\u2019s Going Green, below.<\/p>\n

<\/a> THE BIG STORY THIS MORNING- IMF gives Egypt kudos for deval + rate <\/strong>hike as it looks like the EGP is bottoming out: <\/strong>The IMF\u2019s Middle East and Central Asia boss has praised the Central Bank of Egypt\u2019s (CBE) policy moves last week, saying that the shift to a flexible exchange rate will protect the economy against external shocks and calling the decision to raise interest rates a \u201cstep in the right direction,\u201d Reuters<\/a> reports. (We join them in cheering the deval \u2014 but still can\u2019t get behind the rate hike<\/a>.)<\/p>\n

Rewind:<\/strong> The IMF and Egyptian authorities announced a staff-level agreement<\/a> on a USD 3 bn loan program on Thursday, just hours after the CBE went ahead with<\/a> a series of measures aimed at restoring liquidity to the FX market. These measures include moving to a \u201cdurably flexible foreign exchange rate regime\u201d that allows market forces to determine the value of the EGP \u2014 a key condition from the IMF ahead of the assistance package \u2014 and hiking interest rates by 200 bps. The move triggered a devaluation of the currency that has seen it fall more than 22% over the past three days.<\/p>\n

What the IMF said:<\/strong> A flexible exchange rate \u201cwill help the Egyptian economy to be protected from term-of-trade shocks as well as external shocks, especially at a time when global financial conditions have tightened and became more challenging,\u201d Jihad Azour told the newswire. \u201cThe measures that the central bank took last week in hiking interest rates \u2026 go in the right direction. It's very important to control inflation.\u201d<\/p>\n

<\/a> EGP WATCH- The EGP moved fractionally lower against the greenback ye<\/strong>sterday<\/strong>, edging down a very slight 0.2% to 24.1875, according to central bank figures. The currency has now fallen 22.4% since the central bank\u2019s decision to move to a flexible exchange rate on Thursday, and is down 53.3% since the CBE first devalued the currency on 21 March.<\/p>\n

In fact, we may have (very slightly) overshot: JP Morgan thinks the EGP will be at 23.50 to the USD at year\u2019s end<\/strong>, and Enterprise readers earlier this fall told us last month they were using (on average) 22.12 in their 2023 budgets. Deutsche Bank is the most bearish on the EGP that we know of right now, and it\u2019s penciling in 25.00 to the greenback by year\u2019s end.<\/p>\n

Here\u2019s another company that\u2019s going to have a rough time with the float:<\/strong> Suez Cement expects to suffer around EGP 800 mn in FX losses on the back of the devaluation, CEO Mohamed Hegazy told Bloomberg Asharq<\/a> yesterday. The company, like others in the sector, is reliant on imported coal to power its factories, and also imports many of its components and spare parts. Hegazy\u2019s statements came a day after Ezz Steel warned<\/a> it could lose EGP 2.2 bn due to the weaker EGP.<\/p>\n

MEANWHILE- Some legit relief for food manufacturers?<\/strong> Authorities will begin releasing today some of the food manufacturing inputs that have been piling up at ports because of restrictions on import finance, the Supply Ministry was quoted as saying in a statement by state TV (watch, runtime: 0:18<\/a>). The ministry said all inputs would be released from ports by the end of this week to allow factories to resume production.<\/p>\n

A quid pro quo? <\/strong>The decision was taken following a meeting<\/a> between Supply Minister Ali El Moselhy and food producers. During the meeting the minister implored companies not to raise prices in response to the float.<\/p>\n

PSA- But there\u2019s no interest rate meeting this Thursday:<\/strong> The Central Bank of Egypt\u2019s (CBE) won\u2019t hold its scheduled policy meeting on Thursday in light of last week\u2019s special meeting when it hiked interest rates by 200 bps<\/a> in tandem with the EGP float, it said in a statement (<\/a>pdf<\/a>)<\/a> yesterday. This means that the Monetary Policy Committee will next meet on 22 December in what will be the final meeting of the year.<\/p>\n

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November has come:<\/strong> Here are the key news triggers coming up this week and the next.<\/p>\n