AM — From Thursday’s interest rate decision to (reported) talks with the IMF and a critical new tourism campaign, it’s going to be a very busy week

Good morning, friends, and welcome to a very busy news day. With so much going on, we’re going to jump straight in:

THE BIG STORY OF THE MORNING here at home: Another sign that we may be in early talks with the IMF on what a new assistance program could look like. Bloomberg’s Mirette Magdy and Eric Martin report that we could be interested in either a precautionary and liquidity line (think: money on tap in case we need it) or a non-financial policy coordination instrument. “Egyptian officials are still in talks with the Washington-based lender over what may be the best option given the challenging global environment,” the story says.

IT’S SMART POLICY to know what your options are in a storm, and there’s no question that Egypt is uniquely impacted by the fallout from Russia’s war in Ukraine, as we’ve been writing since before the conflict broke out. The Madbouly government has so far shown a deft hand at managing the crisis, with ministers including Mohamed Maait, Tarek El Molla, Aly El Moselhy and Hala El Said taking the lead in clearly explaining to the public what’s going on — and the PM also holding an epic presser that dealt with the issue head-on. Their policy management has been on point.

NOT UNRELATED- It’s interest rate week. The Central Bank of Egypt will hold its policy meeting this Thursday, 24 March, and six of the nine analysts we’ve spoken with are expecting policymakers to hike interest rates in response to rising inflation and global monetary tightening. We have chapter and verse on this in our customary interest rate poll in this morning’s news well, below.

AND- Expect the price cap on unsubsidized baladi bread to be announced within the next 48 hours, Abdel Moneim Khalil, head of internal trade at the Supply Ministry, said in a televised interview yesterday. An official meeting will be held tomorrow by ministry officials to determine the price, weight, quality and specifications of the unsubsidized loaf of bread, he told Taht Al Shams’s Moataz Abdelfattah in a phone-in (watch, runtime 5:06). This comes after President Abdel Fattah El Sisi last week instructed the government to introduce price controls on bread in response to rapid inflation on the back of the conflict in Ukraine.

What to expect: Prices could be set between EGP 0.75-1.00 per loaf of baladi bread, said head of the bakeries division at the Cairo Chamber of Commerce, Attia Hamad, in a phone-in with Al Hayah Al Youm’s Lobna Assal last night (watch, runtime 6:16). The final price will be determined in an upcoming meeting with the Supply Ministry, he added. Deputy Supply Minister Ibrahim Ashmawy told Kelma Akhira that he doesn’t expect the price per loaf to exceed EGP 1.00 (watch, runtime 3:49).

PSA #1- Enjoy what our favourite weather app is suggesting might be the last week of cool weather this spring. Look for daytime highs on 17-19°C all week and overnight lows in the 6-9°C range, warming to the mid-to-high 20s next week.

PSA #2- There are 13 days left until Ramadan, and the long range forecast suggests the weather on the first day of fasting will be a warm 32°C.

SIGN OF THE TIMES- The UK has lifted all covid-related travel restrictions: Travelers arriving to the UK from abroad no longer need to take any covid tests, quarantine on arrival or fill out a passenger locator form, the government announced in a statement. This applies to all travelers, regardless of their vaccination status or the country from which they’re arriving. Canada is also dropping travel restrictions, saying fully vaccinated folks do not need to take a test before flying to the Great White North effective 1 April.

GOOD NEWS FOR TOURISM HERE IN EGYPT- The British government no longer advises against all but essential travel to South Sinai and Fayoum, the government announced Thursday. “It’s now easier than ever for the 100s of 1000s of Brits who visit Egypt yearly to see more of this amazing country,” UK’s ambassador to Egypt, Gareth Bayley, wrote in a tweet. The UK continues to advise against all travel to North Sinai province, and all but essential travel to parts of South Sinai and the Western Desert.

COVID WATCH- Egypt saw an average of 788 new covid-19 infections per day last week, and a daily average of 12 covid-related deaths, according to Health Ministry figures released yesterday. Almost 31.6 mn people are now fully vaccinated, while 1.7 mn people have now received their booster shots. With the incidence of new covid cases declining rapidly after the omicron peak, we decided two weeks ago to only report covid-19 figures weekly in Enterprise — one week before the Health Ministry decided the same.

WHAT’S HAPPENING TODAY-

BUILDING A FINTECH STARTUP? Today is the deadline to apply for Visa’s global startup competition, the Visa Everywhere Initiative, which is running in Egypt in partnership with the Central Bank of Egypt. Find out more here.

Aspire HR Consultants kicked off their women’s mentorship program with the Cairo edition of the Global Mentoring Walk, an event that takes place in 60 countries around the world in the month of March in celebration of International Women’s Day. The program is for Egyptian women at various stages in their careers and focuses on five specific programs: women on boards and in leadership positions, women returning to work, female entrepreneurs, fresh grads, and giving back to the community. You can apply here to become a mentor or if your company is interested in designing its own mentoring program.

The three-day maritime logistics conference Marlog starts today at the Hilton Green Plaza hotel in Alexandria.

THIS WEEK-

Foreign Minister Sameh Shoukry is on a tour of Asia that will take him to Singapore and Pakistan later this week. The minister has in recent days made whistle stops in Indonesia and Malaysia.

The Egyptian German Green Energy Forum will take place at the Intercontinental Cairo Semiramis hotel on Tuesday 22 March at 5:30pm. The event is hosted by the German-Arab Chamber of Industry.

CIRCLE YOUR CALENDAR-

Catalyst Partners will launch what it is calling the MENA region’s first impact investing fund on Tuesday 22 March, the firm said in a statement (pdf) last week. The fund was founded by the Ins. Holding Company, Misr Ins., Misr Life, Misr Finance and Investment Fund, Banque du Caire, Post For Investments, and Attijariwafa Bank, and aims to deploy EGP 1 bn in local SMEs over the next five years.

EV-charging bid deadline extended: The Public Enterprises Ministry has extended the deadline for sending in expressions of interest for experienced companies that would like to manage the soon-to-be-established EV charging stations company, the cabinet announced in a statement. Interested companies have until Thursday, 24 March to send in their letters. Three companies have told the government they want to take part in the project so far, according to the statement.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

*** It’s What’s Next day: We have our weekly deep-dive into what makes and shapes pre-listed companies and startups in Egypt, the UAE and KSA, touching on investment trends, future sector insights and growth journeys.

In today’s issue: Artificial intelligence is expected to contribute 7.7% to Egypt’s GDP by 2030, according to the Cabinet’s Information and Decision Support Center. We spoke with the CIT Minister’s advisor on AI, Sally Golestan Radwan, who has spearheaded the country’s national AI strategy, about what the strategy is built on, what has so far been implemented, and what still needs to be done for AI to achieve its full potential in Egypt.

The Central Bank of Egypt will likely raise interest rates for the first time in 16 months when it meets this Thursday, a move that the majority of analysts and economists we polled see as significant to curb inflation that has been pushed to a three-year high by the war in Ukraine. Six of the nine analysts we surveyed expect the central bank to hike rates, with some of them calling for a modest 50 bps increase and others predicting a more aggressive tightening of 150 bps.

The central bank has left interest rates steady for over a year, leaving the overnight deposit rate at 8.25% since making a 50 bps cut in November 2020. The lending rate has remained at 9.25% while the main operation and discount rates are both at 8.75%.

Rising inflation could prompt the CBE to act now: The inflation rate jumped to its highest level in 31 months in February, driven by accelerating domestic food prices which hit levels not seen since 2018. The annual inflation rate in Egyptian cities recorded 8.8% last month, compared to 7.3% in January — its highest level since July 2019, while core inflation rate accelerated at its quickest pace since May 2019. The CBE targets a 7% (±2%) inflation rate.

The commodities price shock has changed the game: “The acceleration of geopolitical tensions in Eastern Europe, with the chaotic reaction [in] commodity prices [globally], is standing in the way of the CBE’s inflation target, which is facing various pressures, most of which are out of its control,” Prime Holding’s Mona Bedeir told us. “The bank may be looking to tighten its policy sooner than we expected. We raise our inflation expectations to 9% in 2022, from 8.3%, and therefore we expect the bank to raise interest rates by at least 200-300 bps in 2022, the first of which will be in the March meeting by 50 bps,” she said.

“The CBE may prefer to raise interest rates at its next meeting by up to 150 bps as a proactive step to curb inflationary pressures and a response to tighter monetary policies globally,” Esraa Ahmed, economist at Al Ahly Pharos, said. EFG Hermes’ Mohamed Abu Basha is calling a 100 bps bump this week, while Mubasher International’s head of research Hisham El Shebeini thinks policymakers will go for a 50-100 bps increase.

Egypt’s real interest rate is now negative: Until recently, Egypt boasted one of the highest inflation-adjusted interest rates in the world, an advantage that helped it attract bns of USD in portfolio flows into the local bond market. Eroded by heightened inflation, Egypt’s real rate has fallen to -0.55%. Pointing to the importance of the carry trade to Egypt’s foreign reserves in a time of international turmoil, Monette Doss, chief economist at HC Securities, forecast a 50-75 bps hike.

Whatever happens this week, expect rates to end 2022 higher: Beltone Financial’s chief economist, Alia Mamdouh, thinks the central bank will hold rates during this week’s meeting but is predicting a 100 bps hike before the end of the year. Meanwhile, James Swanston, MENA economist at Capital Economics, predicts a 50 bps hike on Thursday and a further 200 bps of hikes by the end of 2023.

Some expect the central bank to sit tight: “The rush to tighten policy may be unjustified at present," banking expert Mohamed Abdel Aal (a former member of the board of Suez Canal Bank) told us. He ruled out a rate hike this month, telling us that policymakers won’t act while inflation remains within the CBE’s target range. Hany Aboul Fotouh, a former banker turned consultant, also forecast rates to remain unchanged, telling us that the central bank will likely hold fire while the situation in Ukraine and the global markets remains uncertain. He also downplayed the effect of higher US rates on the EGP carry trade, saying that the slender increase shouldn’t stoke a move out of EGP-denominated debt.

Inflation will continue to increase in the coming months as the war continues to disrupt the global food supply and oil prices remain elevated. HC Securities’ Doss is now forecasting inflation to average 11.5% this year while Prime’s Mona Bedeir sees the rate averaging 9% through to the end of the year.

Global financial conditions are tightening: The Federal Reserve joined the tens of other central banks to raise interest rates last week, kicking off its tightening cycle with a 25-bps hike and signaling that similar increases would take place at each of its six remaining meetings this year. The Bank of England also raised its interest rate by another 25 bps on Thursday.

Al Ahly Pharos closed a EGP 747.5 mn securitized bond issuance on behalf of the National Bank of Egypt’s (NBE) Al Ahly Leasing and Factoring Company, Al Ahly Pharos CEO Ahmed Heider confirmed to Enterprise. The three-tranche issuance, which was backed by EGP 910 mn in leasing contract receivables, was Al Ahly Leasing and Factoring’s first securitized bond sale. The tranches are rated A through AA+ by the Middle East Ratings and Investors Service.

Who bought? The Arab Investment Bank and NI Capital, Heider told us.

Advisors: Al Ahly Pharos acted as the financial advisor, lead manager, arranger, and underwriter for the issuance. NBE, Banque du Caire, Suez Canal Bank, and Attijariwafa Bank Egypt were also underwriters for the sale. Dreny and Partners acted as advisor for the issuance, KPMG Hazem Hassan was auditor.

Egyptian issuers have sold around EGP 9.2 bn worth of securitized bonds since the start of 2022, by our count. That’s already 58% of the total value of EGP 15.8 bn taken to market last year in 19 issuances.

Egypt is hoping to lure tourists from several European countries and the United States to our beach resorts with a new promotional campaign that’s hoped to help fill the gap left by the loss of Russian and Ukrainian tourists, two of the country’s most important tourism markets.

The eight-week “Follow the Sun” campaign launched on social media platforms, including Facebook, TikTok and Instagram, to lure tourists from the UK, Germany, Italy, France and the US, promoting tourist hotspots in Cairo, Giza, Luxor, Aswan, the Red Sea and Sinai, the Tourism Ministry said in a statement on Wednesday. Deputy Tourism Minister Ghada Shalaby told Reuters earlier this month that we will look to attract more tourists from the UK, Germany, Spain, France, Italy, Hungary, and the GCC ahead of Ramadan and Easter next month.

Egypt’s Red Sea resorts are being hit hard by the conflict in Ukraine: Visitor numbers in Sharm El Sheikh fallen sharply with the suspension of flights from Russia, Ukraine and Belarus, with sources telling Al Borsa that occupancy rates in the resort town are now less than 35%, down from more than 60% in January. Even before war broke out, visitors from the region were down about 20-25% since the start of the year.

On the other hand, Luxor and Aswan occupancy rates have risen to 60-70% this winter season, Al Borsa quoted government sources as saying. Around 80 hotels are operating right now, compared to less than 45 hotels last year, sources told the news outlet.

Uncertainty for tourism receipts: Tourism revenues are a crucial source of hard currency for Egypt, and the sector accounted for almost 9% of GDP prior to the pandemic. After being hit hard by covid, the industry saw revenues return to pre-pandemic levels in 2021, surpassing USD 13 bn.

Eni to work with Egypt + others to find alternative gas for Europe: Eni pledged to bring more than 14 trn cubic feet of additional gas to the global market and mitigate Europe’s energy crisis by “leveraging established alliances with producing countries,” including Egypt, the Italian energy giant announced in a press release (pdf) outlining its 2022-2025 strategy. This comes as European countries plan to phase out dependency on Russian energy sources after its invasion of Ukraine.

The company’s liquefied natural gas (LNG) volumes are expected to “exceed 15 mn tonnes per year” as the company ramps up gas developments in Egypt, Congo, Angola, Indonesia, Nigeria and Mozambique. “We are increasing our gas production and will send to Italy and southern Europe all the gas we have found,” CEO Claudio Descalzi said in a webcast (watch, runtime: 1:22:30).

Eni has been especially active in Egypt lately: It was awarded gas exploration blocks in the 2021 bid round and has committed to spend at least USD 1 bn on oil exploration and production in the Gulf of Suez and Nile Delta. The company is also expected to announce more agreements with Egypt, with a number of joint initiatives on carbon capture, utilization and storage (CCUS), lined up ahead of the upcoming COP27 global climate summit in Sharm El Sheikh next year.

Egyptian gas exports have taken on a new level of importance in recent months, amid Europe’s ongoing energy crisis. Egypt is one of the countries that Europe is looking to to help solve its gas shortfall as it decreases its reliance on Russian supplies, and Oil Minister Tarek El Molla has pointed to the possibility of us exporting more LNG given elevated energy prices across the board on the back of the war.

Egyptian gas is usually snapped up by Asian buyers, but has increasingly been sent to Europe: Egyptian gas exports to Europe topped 2 mn metric tons in 2021, up from just 270k the year before, according to Kpler shipping data cited by S&P Global Platts.

It’s unclear if Egypt has the capacity for more: El Molla said in December that the country’s LNG terminals were running at maximum capacity, and it is unclear how Egypt could further boost export volumes to Europe. Nikos Tsafos, a senior fellow at the Center for Strategic and International Studies, recently said that the increase in Egyptian exports to Europe would be “short-lived.” “Egypt needs continuous investment and imports to sustain exports. Even then, the existing capacity is probably the maximum we can expect out of Egypt,” he told S&P Global.

Though extra Israeli gas should help us maintain current export volumes as domestic consumption ramps up in the summer months. Exports are expected to fall to 1 bn cubic feet per day this summer from around 1.6 bcf/d currently. Earlier this month, Israel began exporting gas to us via the Arab Gas Pipeline, a new route through which we’re expected to receive 2.5-3 bn cubic meters of gas this year. Prior to this, Israel shipped gas only via the Eastern Mediterranean Gas (EMG) pipeline that runs between Ashkelon and Arish, which has an approximate annual capacity of 7 bcm.

In the long-term: A planned pipeline between Egypt and Greece would enable us to significantly increase exports to Europe, though it’s unlikely to be up and running any time soon. The project remains in its infancy, with the two countries holding initial talks late last year.

REMINDER– Europe (and the rest of the world) is facing one of the largest energy shocks ever: While European sanctions on Russia have so far spared the vital energy sector, uncertainty over the war has sent the price of oil soaring. Goldman Sachs raised its 2022 spot price forecast recently to USD 135, while Norwegian consultancy Rystad Energy believes it could reach an unprecedented USD 200.

OTHER ENERGY NEWS-

• Greek company wants to transport Egyptian LNG: Greek ship management company Chandris Hellas is interested in transporting Egyptian LNG, the Oil Ministry said in a statement on Friday following talks between Oil Minister Tarek El Molla and CEO John Chandris.
• Egypt to get its first floating power plant: The state-owned Egyptian Electricity Holding Company (EEHC) and other Egyptian companies have signed an MoU with Finnish shipbuilding company Deltamarin to build the country’s first floating power plant.

Global price hikes hit gas cylinders here at home: The government has hiked butane gas cylinder prices by 7.1%, reaching EGP 75 for household cylinders (from EGP 70) and EGP 150 (from EGP 140) for commercial use, according to a directive published in the Official Gazette (pdf). This comes on the back of surging global oil and natural gas prices after Russia’s invasion of Ukraine.

Don’t we have enough local natgas to go around? Egypt imports around 55% of its butane gas needs, making it more susceptible to global price fluctuations.

The price of butane cylinders has now risen more than 15% in just four months: The Oil Ministry hiked the price in December by almost 8% in response to rising oil prices.

Delemar Aluminum is investing EGP 750 mn in a new factory in Sadat City, with an eye to begin construction work before the end of the year, CEO Mahmoud Haroun told Hapi Journal. The factory will take three years to complete.

This follows the opening of its new factory: The company announced it has built an architectural glass factory — Delemar for Processed Glass (DPG) — in the Sixth of October industrial zone with an annual production capacity of 600k sqm, according to a press release (pdf). The company plans to invest up to EGP 600 mn in the factory and double or triple its capacity by next year.

Big investment plans: The company plans to double its investments over the next five years, Haroun said in the release. It also plans to ramp up exports to 40% this year, up from 15-20% in 2021.

And an IPO in the cards? Delemar is considering listing on the EGX next year, and plans to discuss the possibility in a general assembly meeting sometime this year. The company is studying the possibility internally with its own chartered accountants, and has not yet tapped any investment banks to advise on the offering, Haroun said, without disclosing the exact timeline, size or value of the planned IPO.

About Delemar: The company is among the largest producers of extruded aluminum products in Egypt and the Middle East region, producing around 20k tons of aluminum annually.

IN OTHER INVESTMENT NEWS-

Industrial gas producer Gulf Cryo will start operating its new factory in Tenth of Ramdan city early next year, Al Borsa quoted Logistics Director Fathy Saad as saying. The new plant will have a production capacity of around 160 tons of liquid oxygen per day, and some 40 tons of nitrogen per day, he said.

It could be at least a few weeks before we see a Russia-Ukraine peace agreement: Peace talks between Russia and Ukraine will take at least “a few weeks,” despite Russia becoming more “adequate,” adviser to the Ukrainian president Mykhailo Podolyak told Bloomberg.

The US and China still don’t seem to be on the same page over the conflict, with a two-hour phone call between US President Joe Biden and Chinese President Xi Jinping on Friday seemingly not making a lot of progress. A White House readout of the conversation said that Biden warned the Chinese leader of “implications and consequences” of assisting Russia’s military campaign, while a statement from Beijing criticized the “sweeping and indiscriminate sanctions” imposed on Moscow by the West.

China could face US sanctions if it supported Russia’s invasion of Ukraine: “Sanctions are certainly one tool in the toolbox,” White House press secretary Jen Psaki told reporters when asked about the punitive measures under consideration by US officials.

ON THE GROUND-

Russian forces are close to taking the strategic southern port city of Mariupol: Following several weeks of shelling, Russian troops have reportedly now entered the city, and are engaged in heavy fighting in the streets with Ukrainian fighters, the Wall Street Journal reports, citing a statement from the Azov Battalion, an ultranationalist militia fighting alongside the Ukrainian army. Taking the city would mark a major strategic victory for Moscow, and would open up a corridor linking the separatist Donbas region in the east to Crimea in the south.

Russia said it launched hypersonic missiles against Ukraine last week on a weapons depot in the western region, Russian news agency Interfax reported yesterday. If true, it would be the first-ever known use of such missiles in combat. Hypersonic missiles are weapons designed to fly at more than five times the speed of sound.

PLANET WAR FINANCE-

Russian oil finds a willing buyer as Europe cuts imports: India has quadrupled its imports of Russian oil this month, buying up several cargoes as European traders cut their purchases in response to the West’s sanctions on Moscow, the Financial Times reports.

Russia’s largest steel producer is at imminent risk of default: Severstal still hasn’t come good on a coupon payment on a USD bond, and will officially be in default if it fails to pay at the end of its grace period tomorrow, Bloomberg reports. If the firm fails to pay in full by Tuesday, it could become the first Russian company to default on its debt since Western companies started declaring financially crippling sanctions on Moscow.

Ethiopia has appointed Hassen Ibrahim as its new ambassador to Egypt, the country’s Foreign Ministry said Thursday. Ibrahim will reside in Addis Ababa due to Ethiopia temporarily closing its embassy in Cairo in September.

Rising food prices and the wheat supply crisis were once again the main topics of discussion on our airwaves last night. Supply Minister Ali El Moselhy and Deputy Supply Minister Ibrahim Ashmawy did the rounds on the talk shows to reassure viewers about rising food prices and the impact of the Russia-Ukraine conflict on the nation’s wheat supplies, around 80% of which comes from the two countries alone. El Moselhy talked to El Hekaya’s Amr Adib (watch, runtime 3:24) while Ashmawy was on with Kelma Akhira’s Lamees El Hadidi (watch, runtime: 6:44 | 3:28).

The price of homes in the state’s middle-income housing projects will not increase even as construction companies face pressure from the rising cost of raw materials on the back of the Ukraine war, Mai Abdelhamid, head of the Social Housing and Mortgage Finance Fund, told Al Hayah Al Youm in a phone-in (watch, runtime 4:32).

The impact of the Russia-Ukraine war on Egypt is still dominating coverage in the foreign press. Reuters has a feature looking at everyday Egyptians affected by rising bread prices, and The Conversation delves into the policy options available for Egypt to mitigate the crisis. Meanwhile the Wall Street Journal quotes a food security expert as saying that our “relatively diversified food basket” and strategic wheat reserves can help us cope with wheat shortages in the near term.

Also getting coverage: Tensions are palpable among Russians and Ukrainians stranded together in Egypt’s Red Sea resorts, the New York Times writes. The Tourism Ministry has been making an effort to support Russians and Ukrainians who were unable to return to their homes after the war broke out, requiring hotels to extend their stays, allowing tourists to stay at three-star hotels at no charge, and most recently, exempting Russian tourists from paying visa overstay fines. Around 8k of the 20k stranded Ukrainians have been flown back to Europe, according to a statement from the Ukrainian embassy in Egypt.

In non-Ukraine news: Egypt has unearthed five ancient tombs estimated to be 5,000 years old near the Pyramid of Merenre in Saqqara. (Reuters | AP | AFP | ABC News)

IDH to open 15 Al Borg Labs, 3 Al Borg Scan branches in 2022: EGX and LSE-listed consumer healthcare giant Integrated Diagnostics Holding (IDH) will open 15 new AlBorg Labs branches in Egypt this year, bringing its national branch count to 220, Hapi Journal quoted Operations Director Nabil Yacoub as saying at a presser on Thursday. The healthcare group will also invest EGP 200 mn to open three new branches for Al Borg Scan in Maadi, Nasr City, and New Cairo.

Other things we’re keeping an eye on this morning:

• Banque Misr launched an integrated financing program to support women entrepreneurs in cooperation with the IFC.
• The government is looking into building an industrial complex in Port Said.

Assad comes in from the cold: Syrian President Bashar Al Assad visited the UAE over the weekend, in his first visit to the Gulf country since the Syrian war began in 2011, WAM reported. The Syrian president met Abu Dhabi crown prince Sheikh Mohamed bin Zayed Al Nahyan as well as Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of the UAE. In an indication of the warming ties, bin Zayed told Assad that Syria is a “fundamental pillar of Arab security” and that Abu Dhabi is “keen to strengthen cooperation” with it, the Emirati state-owned news agency said. The United States was not pleased.

Also worth knowing this morning:

• Libya could be divided again, says the UN: UN undersecretary-general Rosemary DiCarlo has warned that Libya could see two rival administrations again, and called for elections as soon as possible, the Associated Press reported.
• Sudan has raised fuel prices by almost 24%, in the country’s second price hike this month, reaching SGP 672 (or USD 1.51) per liter, Reuters reported.