Back to the complete issue
Wednesday, 7 September 2022

It’s official: Gov’t is on board with a flexible exchange rate

“We as a government do agree that a flexible exchange rate is definitely good for the economy,” Planning Minister Hala El Said told Bloomberg yesterday in a televised interview (watch, runtime: 6:40). El Said also had news on the state privatization program, saying that the Sovereign Fund of Egypt has set up a pre-IPO arm to bring strategic investors onboard ahead of plans to list state-owned firms.

El Said’s remarks will make the folks at the IMF happy: With talks now said to be in the final stages, the IMF has said a more flexible exchange rate is a key condition for agreeing to a new assistance package, while concrete steps towards selling stakes in state assets will likely also play a role.

The gov’t is keeping the communication lines open on strategy: El Said also used the interview to highlight strong recent growth figures and moves to bolster FX inflows by upping exports and attracting foreign direct investment (FDI). She also highlighted the importance of continued strong remittance flows.

Everyone in cabinet is singing from the same hymnal: El Said hit many of the same points that Finance Minister Mohamed Maait covered last week in his media blitz on the Sisi administration’s plans to see us through the current bottleneck.


El Said is the first government official to make a public statement saying cabinet supports allowing the EGP to move more freely against the greenback. Her remarks come after weeks of speculation that new central bank governor Hassan Abdalla will allow the currency to depreciate further against the USD to help secure an assistance package from the IMF, attract foreign capital, and break an import logjam.

The key question now: Will the float be sudden or gradual? With more EGX flexibility now seeming all but inevitable, market watchers are asking whether the pound will slide against the greenback at a slow pace or whether we're in for a 2016-style shock devaluation. Either way, most market watchers are forecasting a double-digit depreciation by the end of the year, with BNP Paribas forecasting the currency to settle at EGP 23-24 to the USD. One USD is currently changing hands at USD 19.29, with the pound having slipped more than 20% since the devaluation in March.

*** Where do you see the FX rate settling? Tell us in our Fall 2022 Reader Poll, which closes tomorrow.


SMART POLICY- The gov’t has set up a fund to place stakes in state-owned companies with strategic investors ahead of IPOs: The Sovereign Fund of Egypt (SFE), which El Said chairs, earlier this week set up a pre-IPO fund to offer stakes in state-owned companies to “strategic investors and different sovereign wealth funds” ahead of listing them on the bourse, El Said said. The government would then look to list the firms “when the market is ready,” El Said said.

Which companies are up for grabs? The new fund would look to acquire stakes in state-owned assets including those under the Public Enterprises Ministry, port and transport firms, and companies operating in the New Administrative Capital, a government source told Enterprise.

We knew this was coming: SFE head Ayman Soliman in June said private stake sales would be the way forward for the state privatization program as volatile market conditions persist on the back of the war in Ukraine and volatility in global capital markets. Government officials have been keen to stress that the privatization program remains a priority even as IPOs are pushed back.


Does BoA know something we don’t? Analysts at Bank of America are still predicting the government to arrange a massive USD 15 bn, three-year facility with the IMF, Bloomberg reports, despite the insistence of senior officials here that any loan package will be much more limited. In a fresh report, the bank says “a large and ambitious IMF program is needed,” adding that a larger loan would require a flexible exchange rate. Finance Minister Mohamed Maait said that USD 15 bn was “too high” and “totally inaccurate” after Goldman Sachs predicted the same figure back in July. BNP Paribas is expecting a USD 3-5 bn package.

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.