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Sunday, 28 August 2022

THIS MORNING: Abdalla to “go faster” on EGP adjustment + Is the IMF going easy on us?

Good morning, friends, and welcome to a very busy Sunday. It’s largely good news to start the week, with lots of fresh investment in green energy, a new head of the EGX, and the easing of cash deposit and withdrawal restrictions at banks setting the tone.

There are also signs we have another busy news week ahead of us:

The Madbouly government will roll out new emergency social protection measures this Thursday, saying the move will not trigger the folks at the IMF. The expansion of the social safety net will see some 1 mn families join the Takaful and Karama social security programs as the state also raises ration card allowances and disburses emergency aid, Prime Minister Mousatafa Madbouly, told reporters over the weekend.

The increased social spending is fine by the IMF, the prime minister suggested, downplaying the idea that the Fund is imposing harsh fiscal and monetary conditions in exchange for a fresh loan. “The Fund does not force us to take any measures that could affect the Egyptian citizen. On the contrary, it welcomed the exceptional social protection package that we announced,” the statement said. This echoes comments made by Supply Minister Ali El Moselhy last week, who suggested that the Fund may have taken bread subsidy reform off the negotiating table.

Talks with the IMF are still ongoing and Egypt “hopes to reach an agreement as soon as possible,” Madbouly said. We entered negotiations this past March as part of a bid to lock in financial support following the economic shocks caused by Russia’s war in Ukraine, rising interest rates, and the global-risk off in financial markets. Madbouly said last week that the talks are in the “final stages.”

WATCH THIS SPACE- What’s on Hassan Abdalla’s mind? “I guess he [Abdalla] will go much faster in terms of currency adjustment. Not a sudden devaluation like Tarek did, [rather] a faster pace,” Reuters’ Patrick Werr quotes Hisham Ezz Al Arab as saying. The veteran banker and longtime CIB chef was speaking in his new capacity as a top advisor to the new central bank governor.

CLARIFICATION: Hisham Ezz Al Arab’s remarks regarding the expectation that CBE Governor Hassan Abdalla might “go faster” on allowing the EGP to float against the greenback were made hours prior to his being named advisor to the governor. Hisham was not speaking in his capacity as an advisor.


Prime Minister Mousafa Madbouly is in Tunis for the second day of Japan’s Africa investment conference. The first day of the Tokyo International Conference on African Development (TICAD) saw the PM hold talks with Japanese Prime Minister Fumio Kishida and meet with business leaders including Toyota Tsusho. In his address to the gathering, the PM called on African nations to work together to strengthen food supply chains and reiterated calls for debt relief countries on the continent.

The headline from Day 1: Japan pledged USD 30 bn in development aid for Africa during the conference, with smaller, undisclosed sums committed to food security in partnership with the African Development Bank, Reuters reported. Japanese PM Kishida also promised to work on securing grain shipments to Africa in an effort to plug the food crises that have erupted across the continent following Russia’s invasion of Ukraine.

It’s do or die for Ghazl El Mahalla’s micro-IPO: It’s deadline day for the retail component of the football club’s IPO, which has struggled to convince investors to subscribe. Ghazl El Mahalla has already extended the subscription period twice and as of the middle of August, had only received bids for 22% of the shares on offer.

The Madbouly government will hold consultations with representatives from the wood industry on its privatization strategy. The government is holding workshops and consultations with stakeholders from different industries every Sunday, Tuesday, and Thursday on its privatization plans. You can find more details on the schedule of the meetings here.


WATCH THIS- COP27 will aim to attract concrete investments — and not just pledges — in fields including renewable energy, green hydrogen projects, agriculture, and food and water security, Egypt climate envoy Mahmoud Mohieldin said in an interview. (Masaa DMC | watch, runtime: 37:26)

Speaking of the road to COP27- “Global climate action remains insufficient,” EU says in draft negotiations mandate for COP27: The EU is planning to warn major economies that current climate change action is falling short, according to a draft of its mandate for this November’s COP27 summit seen by Reuters. The draft, which faces weeks of negotiations and amendments before approval in October, is pushing countries to set more ambitious pollution targets to stop global warming spiraling beyond 1.5°C.


No story is dominating the global conversation this morning: The focus of the global financial press continues to be on Jackson Hole, where folks are trying to work out what Fed Chairman Jerome Powell’s speech (more on this in this morning’s Planet Finance section, below) means for the markets and the global economy. (See: Bloomberg | Reuters | CNBC). Meanwhile, the attention of the US press is turned to the upcoming midterm elections and fate of Donald Trump (See: AP | Washington Post | NYT | WSJ), while the Financial Times leads with the devastating effects of the energy crisis on UK households.

MEANWHILE- China announces debt relief measures for African countries: China plans to write-off 23 zero-interest loans to 17 African nations and will send USD 10 bn of its IMF reserves to help poor and middle-income countries on the continent, Foreign Minister Wang Yi said last week, according to Bloomberg. Wang did not disclose the value of the loans or specify which countries would have debts forgiven.

Beijing has signaled in recent months that it will put the brakes on the lending under Xi Jinping’s flagship Belt and Road Initiative as bns of USD of loans made across the developing world threaten to go bad. Chinese lenders had to renegotiate more than 6% of the USD 838 bn in BRI loans over the past two years as borrowers enter debt distress, but this year surging inflation worldwide, rising interest rates and a stronger greenback are heaping even more pressure on borrowers in developing economies.

THE HOMETOWN ANGLE- Egypt hasn’t turned to Chinese lenders in the same way other African countries have: Outside of the new capital business district and the light rail transit system, China has had little involvement financing infrastructure projects in Egypt, which has tended to rely far more heavily on western development finance institutions. A report (pdf) out last year estimated Egypt’s total sovereign and hidden debt to China to be in the region of USD 4.6 bn; small fry compared to Ethiopia (which owes USD 15.4 bn) or Africa’s most China-indebted country, Angola (with a USD 52.3 bn debt pile).


*** 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: Female technology (femtech) is being hailed as the next big thing for startups to capitalize on, with a growing appetite among consumers for the tech-enabled health platforms helping to reel in increased investor interest.

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