Back to the complete issue
Wednesday, 31 August 2022

Everyone’s talking about the EGP

EGP WATCH- Credit Suisse + Arqaam are the latest to comment on the fate of the EGP: FX flexibility is “definitely going to come” if Egypt is to solve its external imbalances, Zeina Rizk, executive director of fixed income asset management for Arqaam Capital, told Bloomberg TV yesterday (watch, runtime 5:09). The government will also likely face “more pressure on pressing forward with structural reform … improved governance,” she added, as Egyptian officials continue talks with the IMF for a fresh facility to help shore up the economy.

Credit Suisse’s head of MENA research, Fahd Iqbal, also stressed the importance of FX flexibility as a “sustainable” strategy for the currency in an interview with Bloomberg Asharq (watch, runtime: 3:40). “We expect the IMF to provide a comprehensive program that posits significant reforms and provides significant support,” Iqbal said, adding that one of the issues on which it could provide clarity is the currency. “The delay in talks with the IMF is a good sign that shows the fund is committed to and serious about supporting Egypt,” he added.

Everyone wants to talk about Egypt: Iqbal and Rizk are the latest in a chorus of analysts to appear on Bloomberg to voice their thoughts on Egypt over the past two weeks as the business newswire frames the country as “the symbol of the distress gripping poorer nations.” Bloomberg has also published a series of articles suggesting that Egypt is inching towards default — though there is by no means a consensus among experts about how dangerous this moment could prove.

Positivity from the minister, but no mention of the currency: This comes following Finance Minister Mohamed Maait’s Monday media blitz which he used to try and steer the conversation on the economy in a more positive direction. The minister shared optimistic fiscal forecasts for the coming year and announced budget and debt targets agreed with the IMF.

The consensus: Following the shock resignation of Tarek Amer as central bank governor, the consensus among everyone and their mothers is that the EGP is destined to fall against the greenback in the coming weeks and months. The question now is whether the central bank’s new governor, Hassan Abdalla, will proceed with a gradual float or go the “shock therapy” route with a sudden devaluation.

Movements this week might be answering that question: The EGP weakened against the greenback again yesterday, slipping another 0.1% to 19.28. After remaining flat for most of the month, the currency has now fallen 0.4% since 21 August when Abdalla was appointed, and is down 22.2% since the devaluation in March.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.