Back to the complete issue
Sunday, 25 September 2022

It could take another month or two to finalize IMF support -Maait

Talks for an IMF facility could wrap in another month or two, Finance Minister Mohamed Maait told Bloomberg (watch, runtime: 14:28) in a wide-ranging interview that tackled everything from the IMF loan to Egypt’s rising debt levels, devaluation of the EGP, and future bond issuances.

Maait again refrained from providing a range for the size of the IMF loan, saying only that this will be decided in the final stage of negotiations. Maait has previously signaled that the sum will be significantly lower than the USD 15 bn that some analysts have forecast, while some in the market are now expecting a package in the USD 3-5 bn range. Egypt has been in talks with the IMF since March in a bid to secure financial assistance following the economic shocks brought on by Russia’s war in Ukraine, rising interest rates in advanced economies, and a global risk-off hitting emerging markets.


Maait declined to say whether a further depreciation of the EGP is expected. “I cannot say how the markets will move,” he said, when pushed on whether the currency would weaken further should the USD continue to rise. The economy is facing a “difficult” time because of the combination of pressures including inflation, rising interest rates, commodity prices, and portfolio outflows.

Debt levels are rising thanks to the deval: Some 4.0% of our debt-to-GDP ratio — which stood at 87.2% as of June — is due to the change in the USD-EGP exchange rate, Maait said.

Remember- Planning Minister Hala El Said has made it clear that the government is on board with a flexible exchange rate policy. The EGP has been inching down against the greenback in recent weeks as the central bank appears to pursue a gradual devaluation policy. The EGP currently stands at around 19.52 to the USD — down nearly 24% since the initial devaluation in March. Most market watchers are forecasting a double-digit depreciation by the end of the year.


“Affordable” loans from China + Japan? Egypt is in talks with Japan for a USD 500 mn loan, part of which will go towards environmentally friendly projects, Bloomberg quotes Maait as saying. Maait also reportedly said the country is in talks with China on securing loans at a reasonable cost as part of a “package of alternatives.” The government is looking to China and Japan for new avenues to raise foreign currency following a major hit to portfolio inflows amid the global economic turbulence.

Remember- China has emerged as a competitor for the IMF in recent years by shelling out discreet emergency loans to “crisis-hit” countries with no strings attached. Egypt has reportedly been getting a slice of the pie, though it’s not clear how much we’ve received from the country.

The gov’t is scouting out several less-expensive alternatives for FX: Maait also reiterated plans to issue sukuk, CNY-denominated panda bonds worth more than USD 500 mn, and a “green” JPY-denominated bond, following the ministry’s maiden samurai bond issuance in late March. “With the conditions of capital markets, we have to rely on nontraditional, cheaper sources of foreign currencies,” Maait said, adding that debt diversification has helped us manage a “huge outflow” of 22 bn USD in hot money. Maait told us in August that Egypt is in talks with Chinese officials to issue panda bonds and is still on the hunt for bookrunners for the issuance.

Another green bond in the works? The government is also looking at the possibility of issuing a green eurobond “if market conditions allow,” Maait added. The Finance Ministry in January signaled that it is looking to take to the green bond market for a second time with another USD 750 mn issuance, matching the 2020 issuance that saw Egypt debut sovereign green bonds in the MENA region.


The government is still looking to hedge against commodities like wheat but will wait for the markets to cool further, Maait said. “When wheat prices come back under USD 300 per ton, I think we may say that’s a reasonable cost for hedging which can support us to go for such a decision,” he said. International wheat prices have fallen back from record highs in recent weeks as supply problems ease, but remain elevated due to the impact of the war in Ukraine. Hedging could allow the state to purchase commodities at a fixed price during times of market volatility.

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.