{"id":592383,"date":"2023-08-04T00:00:00","date_gmt":"2023-08-04T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2023\/08\/04\/cbe-goes-against-expectation-lots-of-macro-updates\/"},"modified":"2023-08-04T00:00:00","modified_gmt":"2023-08-04T00:00:00","slug":"cbe-goes-against-expectation-lots-of-macro-updates","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2023\/08\/04\/cbe-goes-against-expectation-lots-of-macro-updates\/","title":{"rendered":"CBE goes against expectation + Lots of macro updates"},"content":{"rendered":"

Good morning, friends, and happy FRIDAY.<\/strong> We hope the blackout gods spare you this weekend, so you can enjoy some relaxing downtime in the comfort of your AC. <\/p>\n

AND IF YOU\u2019RE JOINING THE WEEKLY SAHEL EXODUS- Before you run to the beach for your tan<\/strong>, may we suggest you try out some of our favorite local skincare products for the summer?Our Enterprise Guide for the week lists some of our favorite boutique local skincare brands, many of which use natural ingredients to help protect and take care of your skin before and after you oil yourself up under the sun. <\/p>\n

\u2600\ufe0f <\/strong>THE WEATHER THIS WEEKEND- You\u2019re going to need the SPF: <\/strong>Today\u2019s temperatures will stay stable at 38\u00b0C and drop to 25\u00b0C in the evening, while the mercury is set to climb tomorrow to a daytime high of 39\u00b0C, before falling to 27\u00b0C, as per our favorite weather app.<\/p>\n

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

LAST WEEK IN 3 MINS- It was a relatively quiet week on the privatization front, but we had a flurry of macro updates and plenty of news on the energy front<\/strong> to keep us busy. <\/p>\n

ON THE MACRO FRONT-<\/strong><\/p>\n

#1- <\/strong>The CBE raises interest rates: <\/strong> The Central Bank of Egypt (CBE) decided to raise interest rates by 100 bps at yesterday\u2019s meeting, defying expectations of a third consecutive hold. The overnight deposit rate was raised to 19.25%, while the overnight lending rate increased 20.25%. The CBE\u2019s main operation rate grew to 19.75% and the discount rate was also raised to 19.75%, according to a statement from the CBE (pdf)<\/a>. The Monetary Policy Committee\u2019s decision came \u201cin order to contain the inflationary pressures and anchor inflation expectations around the CBE\u2019s targets.\u201d, the statement reads.<\/p>\n

#2-<\/strong>Private sector contraction softens again in July: <\/strong>The contraction in Egypt\u2019s non-oil private sector slowed to its softest pace in almost two years on the back of uptick in market demand, according to S&P Global\u2019s purchasing managers\u2019 index (pdf)<\/a>. The country\u2019s PMI rose for the fourth consecutive month, reaching 49.2 in July, up from 49.1 in June.<\/p>\n

#3- Morgan Stanley <\/strong>lowered its growth outlook<\/a><\/strong> for Egypt in FY 2023-2023<\/strong>, and now expects the economy to grow 4.2% during the year, down from its previous forecast of 5.0%. Analysts at the investment bank also anticipate another EGP devaluation in September or October and another 200 bps interest rate hike alongside the devaluation.<\/p>\n

#4- Net foreign liabilities reached record highs in June<\/strong> amid the country\u2019s continuing FX shortage. The deficit in net foreign assets widened to negative USD 27.1 bn<\/a> in June from negative USD 24.4 bn in May, by our count.<\/p>\n

#5- External debt reached another record high: <\/strong>External debt rose<\/a> 1.5% to USD 165.4 bn in 3Q FY 2022-2023, up from USD 162.9 bn in the previous quarter. The figures also mark a 5% y-o-y increase from when external borrowing was at USD 157.8 bn. <\/p>\n

ONE SINGLE PRIVATIZATION STORY MADE THE ROUNDS- <\/strong><\/p>\n

Maersk could acquire half of the 545-MW Zafarana wind farm<\/strong> after the government approved the shipping giant\u2019s ownership<\/a> in principle. The company contacted the New and Renewable Energy Authority (NREA) to express interest in acquiring the asset but hasn\u2019t yet submitted an official bid. <\/p>\n

BUT THERE WAS A LOT ON THE ENERGY FRONT-<\/strong><\/p>\n

#1- The government started operating its national electricity grid according to its rolling<\/strong> blackout schedule <\/strong>announced earlier this week<\/a>. Blackouts will continue until at least the end of August<\/a> as the summer heatwave continues to put pressure on the country\u2019s electricity network. You can view the full Cairo timetables here<\/a> and here<\/a>, and the Giza schedule here<\/a>.<\/p>\n

There were some hiccups with the rollout: <\/strong>Only a<\/a> <\/a><\/strong>few areas<\/a> have reportedly experienced blackouts according to the pre-announced schedules. Some people have reported that blackouts failed to follow schedules while others said they lasted longer than the one hour maximum previously suggested by ministers.<\/p>\n

#2- Oil + gas exploration updates:<\/strong> Ministers greenlit<\/a> three oil and gas concession agreements worth USD 319.5 mn that will see three multinational energy companies digging at least 13 wells in the Mediterranean and Gulf of Suez. Meanwhile, Shell is set to<\/a> begin<\/a> drilling new gas exploration wells at its concession areas in the Mediterranean in September. <\/p>\n

#3- We\u2019re seeing Swiss interest in a USD 1 bn green hydrogen plant: <\/strong>Switzerland-based energy investment firm Smartenergy is close to reaching an agreement<\/a> with authorities to establish a USD 1 bn green hydrogen facility in Egypt.<\/p>\n

WE ALSO HAD A FLURRY OF<\/strong>DEBT NEWS, including:<\/strong><\/p>\n

#1- Potential loans from the IFC: <\/strong>The International Finance Corporation (IFC) is considering<\/a> extending a USD 55 mn loan to Al Baraka Bank for on-lending to to local and woman-owned micro, small and medium sized enterprises, and a USD 30 mn loan for Edita to support its working capital and fund fresh capex. <\/p>\n

#2- And securitization transactions:<\/strong> MNT-Halan\u2019s microfinance subsidiary Tasaheel closed<\/strong>a<\/a> <\/a><\/strong>EGP 3.34 bn securitized bond issuance<\/a><\/strong>, while Raya Holding\u2019s non-banking financial services outfit Aman Financial Services and its consumer finance arm Aman Microfinance issued EGP 859 mn in securitized bonds<\/a>. Meanwhile, Talaat Moustafa Group (TMG) subsidiary the Arab Company for Projects and Urban Development<\/strong>sold<\/a> EGP 411 mn of bonds<\/a><\/strong> backed by securitized future cash flows.<\/p>\n

AND NEWS OF A POTENTIAL M&A-<\/strong> Beltone has reportedly signed an MoU<\/a> to acquire<\/a> Minya-based micro finance provider Cash<\/a>, and is waiting for regulators to give its go-ahead before it starts due diligence.<\/p>\n

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

<\/p>\n

Capmas and the CBE will publish inflation figures for July on 10 August. <\/strong>Inflation accelerated at a record pace in June<\/a> as the impact of multiple currency devaluations combined with higher seasonal demand sent food prices soaring. Annual urban rate of inflation rose to 35.7% y-o-y during the month.<\/p>\n

The central bank will publish July\u2019s foreign reserves figures early next week. <\/strong>FX reserves continued<\/a> to inch up in June, reaching USD 34.81 bn.<\/p>\n

Shalateen Mineral Resources gold mining tender deadline on Thursday: <\/strong>Shalateen is inviting bids for concessions in five areas of the Eastern Desert by 10 August, but could still apply to the Oil Ministry to extend<\/a> the deadline.<\/p>\n

A second round of Ukraine talks in Jeddah: <\/strong>Senior officials from as many as 30 countries \u2014 including Egypt \u2014 are set to attend<\/a> a second round of talks over the Russia-Ukraine conflict in Jeddah on Saturday and Sunday.<\/p>\n

Check out our full calendar on the web<\/a><\/strong> for a comprehensive listing of upcoming news events, national holidays and news triggers.<\/p>\n

YOUR MOST CLICKED LINKS-<\/strong><\/p>\n