{"id":586515,"date":"2023-05-12T00:00:00","date_gmt":"2023-05-12T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2023\/05\/12\/it-was-all-about-the-fy-2023-2024-budget-lots-of-privatization-updates\/"},"modified":"2023-05-12T00:00:00","modified_gmt":"2023-05-12T00:00:00","slug":"it-was-all-about-the-fy-2023-2024-budget-lots-of-privatization-updates","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2023\/05\/12\/it-was-all-about-the-fy-2023-2024-budget-lots-of-privatization-updates\/","title":{"rendered":"It was all about the FY 2023-2024 budget + lots of privatization updates"},"content":{"rendered":"

Good morning, friends, and happy FRIDAY. <\/span>We hope you survived our first full workweek in <\/span>ages, and that you have some fun plans coming up this weekend to take your mind off work. <\/span><\/p>\n

May we suggest some of the spots in Cairo, Alexandria <\/span>and beyond that you won\u2019t usually find in any tour guide? <\/span>We break down what those spots are \u2014 and the stories behind them \u2014 in today\u2019s Enterprise Guide, below.<\/span><\/p>\n

Enterprise Weekend comes out each Friday at 9:00am CLT.<\/span> We\u2019ll be back on Sunday at 6am with EnterpriseAM. Until then: Enjoy the weekend.<\/span><\/p>\n

LAST WEEK IN 3 MINS-<\/span><\/p>\n

<\/span>It was a busy week on both the macro and privatization fronts last week<\/span>, as <\/span>the <\/span>government <\/span>unveiled its FY 2023-2024 budget<\/span> and as it looks to accelerate progress on the state privatization program. <\/span><\/p>\n

Some of the highlights include:<\/span><\/p>\n

#1- The government <\/span>now sees<\/a><\/span> the budget deficit finishing the current fiscal year at 6.4%<\/span>, <\/span>up from 6.1% in FY 2021-2022. The budget document presented to the House of Representatives had forecast an \u201cadjusted budget deficit\u201d of 8.0% in FY 2022-23. Spending in FY 2023-2024 will increase 34% to EGP 2.99 tn on higher wages, borrowing costs, and subsidy allocations. <\/span><\/p>\n

#2- <\/span>The country\u2019s debt-to-GDP ratio will rise to 96% by the end of FY 2022-2023<\/span>, before <\/span>falling to 91.3% in FY 2023-2024. New borrowing is set to increase by 22% in FY 2023-2024, with the government expecting to sell EGP 2.04 tn in new treasury bills and bonds.<\/span><\/p>\n

#3- Some EGP 70 bn (USD 2.26 bn) are expected to come in through our privatization <\/span>program next year<\/span>.<\/span><\/p>\n

ECONOMY-<\/span><\/p>\n

#1- Inflation <\/span>eased<\/a><\/span> to 30.6% y-o-y in April from <\/span>32.7% the month before<\/a><\/span> for the first time in <\/span>10 months in April <\/span>thanks to a favorable base effect<\/span>, the stabilization of the FX rate, and a slight slowdown in food price growth. <\/span><\/p>\n

Expect it to pick up next month as the government hiked diesel prices by 14% <\/span>raising it by <\/span>EGP 1.00 to reach EGP 8.25 per liter. <\/span>The decision<\/a><\/span> comes as the government\u2019s cost of purchasing diesel reached EGP 12.25 per liter due to higher prices in the global market and the EGP devaluation. Public transport fares grew by some 10% nationwide in response. <\/span><\/p>\n

#2-<\/span>Fitch Ratings <\/span>downgraded Egypt\u2019s sovereign credit rating<\/a><\/span> for the first time since<\/span> 2013,<\/span> relegating the country\u2019s rating to B from B+ and maintaining its negative outlook. The downgrade has been attributed to \u201chigh external financing requirements, constrained external financing conditions and the sensitivity of Egypt's broader financing plan to investor sentiment,\u201d the ratings agency said.<\/span><\/p>\n

#3- JPMorgan + Moody\u2019s delivered the latest warnings about the consequences of <\/span>delaying reform:<\/span> Moody\u2019s <\/span>signaled<\/a><\/span> it could downgrade our credit rating for the second time this year if our external position continues to deteriorate, while JPMorgan <\/span>agreed<\/a><\/span> that delays on the state privatization program could weaken liquidity and noted that it puts into question the sustainability of Egypt\u2019s debt. <\/span><\/p>\n

On the bright side, JPMorgan said that Egypt should be able to seal a staff-level <\/span>agreement with the IMF next month<\/span>, putting us on course to getting board approval and the next loan tranche by the third quarter.<\/span><\/p>\n

PRIVATIZATION WATCH- <\/span><\/p>\n

#1-<\/span>The Sovereign Fund of Egypt <\/span>acquired<\/a><\/span> a 49% stake in pharma chain El Ezaby <\/span>Pharmacy,<\/span> enabling the company to almost double its branch count to 600.<\/span> The SFE\u2019s healthcare sub-fund and private equity firm B Investments are also setting up a pharma logistics and distribution firm in partnership with El Ezaby to offer logistics and administrative support and trade and distribution services to local pharma companies.<\/span><\/p>\n

#2- Abu Dhabi wealth fund ADQ is reportedly close to acquiring a 20-25% stake in <\/span>Egyptian Linear Alkyl Benzene (Elab)<\/span> in <\/span>a transaction<\/a><\/span> that is expected to be completed by the end of this month. <\/span><\/p>\n

#3- Progress on the TE stake sale?<\/span> The government\u2019s plans to sell a minority stake in <\/span>Telecom Egypt (TE) to investors <\/span>look to be back on the table<\/a><\/span>, with reports saying that it could begin the process of selling a 10% stake in the state-owned telecom giant <\/span>this week. <\/span><\/p>\n

Selling at a discount: <\/span>The government will be selling shares at EGP 22.25 apiece, a 3.8% <\/span>discount from TE\u2019s current share price of EGP 23.14. The transaction would be worth around EGP 3.8 bn (c. USD 122.8 mn) at that price.<\/span><\/p>\n

#4- Wind farms attract investor interest: <\/span>Saudi Arabia\u2019s ACWA Power, the UAE\u2019s Alcazar <\/span>Energy and our friends at local renewables firm Infinity <\/span>are reportedly among seven companies<\/a><\/span> interested in acquiring Egypt\u2019s two largest wind farms. The government-owned 580-MW <\/span>Gabal El Zeit<\/a><\/span> and 545-MW <\/span>Zafarana<\/a><\/span> wind farms were both included in the <\/span>list of 32 companies<\/a><\/span> and assets earmarked for privatization in February and have attracted significant interest among investors, with the sales reportedly expected to be completed before the end of 2023.<\/span><\/p>\n

WHAT\u2019S HAPPENING NEXT WEEK-<\/span><\/p>\n

<\/p>\n

<\/span>Next week is interest rate week:<\/span> Figures released last week indicating inflation <\/span>is cooling might give the central bank <\/span>the chance to keep rates on hold at its next meeting on Thursday, 18 May, EFG Hermes Research\u2019s head of macroeconomic analysis, Mohamed Abu Basha, <\/span>wrote<\/a><\/span> this week. CI Capital, on the other hand, is penciling in 100-bps worth of hikes across the committee\u2019s next two meetings. The CBE has raised interest rates by 1000 bps over the past year after delivering a jumbo <\/span>200-bps rate hike<\/a><\/span> in March. CBE Governor Hassan Abdalla last month <\/span>expressed doubts<\/a><\/span> on the effectiveness of monetary policy to curb inflation, and said that policymakers need to be \u201cvery careful\u201d about tightening policy further.<\/span><\/p>\n

** Keep an eye out for our customary interest rate poll on Sunday ahead of the central bank meeting.<\/span><\/p>\n

The National Dialogue meetings kick off this coming Sunday<\/span>, after President Abdel Fattah <\/span>El Sisi recently inaugurated the opening session of the National Dialogue after a year of preparations. The <\/span>dialogue<\/a><\/span> will hold three meetings a week for an unspecified duration to discuss more than 100 political, economic, and social issues. Some 800 individuals have been invited to participate. All sessions will be broadcast to the public.<\/span><\/p>\n

We can also expect to see some more movement on the state\u2019s privatization program.<\/span> Military-owned bottled drinks firm Safi and fuel retailer Wataniya <\/span>will start receiving offers<\/a><\/span> from strategic investors this month, and government officials are confident we\u2019ll see stake sales between now and the end of June, sources with first-hand knowledge of the process tell us. <\/span><\/p>\n

PSA- The <\/span>expat car import initiative<\/a><\/span> will draw to a close <\/span>on 14 May.<\/span><\/p>\n

<\/a><\/p>\n

<\/span> And, of course, our very own <\/span>Enterprise Exports & FDI Forum<\/a><\/span> will be taking <\/span>place at the<\/span> Four Seasons Hotel Cairo at Nile Plaza on <\/span>Monday, 15 May.<\/span> The event will see CEOs, top execs, bankers, and development finance folks attempt to solve the biggest economic issue of our time: How do we get out of our FX crunch. <\/span><\/p>\n

Who\u2019s speaking<\/span>?<\/span>Hossam Abou Moussa, <\/span>partner at Apis<\/span>, Hassan Massoud, <\/span>associate director and head of private equity (Southern Mediterranean) at the EBRD, <\/span>Tarek Kamel<\/span>, CEO of Nestle Egypt; <\/span>Omar Elsahy<\/span>, general manager of Amazon Egypt; <\/span>Khaled Morsy<\/span>, CEO of DB Schenker; <\/span>Shady William<\/span>, managing director of IDG;<\/span> Mohamed Talaat Khalifa<\/span>, CEO of Concrete; <\/span>Mark Wyllie<\/span>, CEO of Beyti; <\/span>Kareem Abou Ghaly<\/span>, chairman and CEO of Pasta Regina; <\/span>Yasmine Khamis<\/span>, chair of The Orientals Group, <\/span>Cheick-Oumar Sylla<\/span>, director for North Africa and Horn of Africa at IFC; <\/span>Hossam Sallab<\/span>, CEO and vice-chairman of Sallab Group and Royal Ceramica; <\/span>Tarek Hosny<\/span>, head of investments and projects at Fertiglobe; <\/span>Helmy Ghazi, <\/span>deputy CEO of HSBC Egypt; <\/span>Shams Eweis,<\/span> corporate affairs director, Egypt, North Africa and Levant at Mars; <\/span>Nada El Ahwal<\/span>, CSO of Transmar; <\/span>Nadia El-Tawil<\/span>, investment officer at AfricInvest, <\/span>Mostafa Bedeir<\/span>, CEO of Giza Seeds and Herbs, <\/span>Abdallah Sallam<\/span>, CEO at Madinet Masr, <\/span>Yassir Zouaoui<\/span>, partner at McKinsey; and <\/span>Mohamed ElGebely<\/span>, team leader at USAID Trade.<\/span><\/p>\n

Topics and live interviews will include:
<\/span><\/p>\n