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Tuesday, 4 October 2022

THIS MORNING: It’s like IMF talks are buffering at 99.9% complete

Good morning folks, and welcome to hump day. The upcoming 6 October holiday technically means we’re already over the hump and sliding into the last long weekend of the year.

THE BIG STORY HERE AT HOME- Talks with the IMF are really, nearly (almost) (but not quite) done: The International Monetary Fund should reach staff-level agreements on loans to Egypt and Tunisia “within days or weeks, hard to predict but it will be very soon," IMF Managing Director Kristalina Georgieva told Reuters yesterday during a visit to Riyadh.

A “sizeable” package: Georgieva demurred on just how big the loan from the multilateral lender will be, saying only that the programs with Egypt and Tunisia are “sizeable” and will be set at the very end of negotiations. Only time will tell whether “sizeable” turns out to be in the USD 3-5 bn range that BNP Paribas has penciled in, or closer to the USD 15 bn Goldman Sachs has suggested (an estimate that officials including Finance Minister Mohamed Maait have said is too large).

For those of you keeping score at home: Egypt has been in negotiations with the IMF since March in a bid to secure financial assistance following the economic shocks brought on by Russia’s war in Ukraine and rising interest rates in advanced economies. Policymakers have kept us on the edge of our seats, with talks said to be in the “final stages” or wrapping up “soon” for weeks now.

EGP WATCH- Yesterday marked a fresh low for the EGP against the soaring greenback. The EGP fell as much as 10 piasters yesterday, closing the day at 19.6683 against the greenback. That marks a new record low against the rising US currency.

The EGP has lost 24.8% of its value against the USD this year, including the sudden 15.9% devaluation in March and the slow slide the central bank has allowed since then. Yesterday saw the quickest weakening of the EGP in four months, according to Reuters. The currency last week breached the record low of 19.5605 set five years ago on the back of the historic 2016 float.

Y’all think the EGP has further to slide: Enterprise readers see the EGP dropping to 22.12 on average, according to our Fall 2022 Reader Survey. Goldman Sachs sees the EGP settling in the 22-24 band, while BNP Paribas is forecasting the currency to fall to 22-23 by the end of the year.

The USD is on a tear: The US Federal Reserve’s tightening cycle and a wave of risk-off sentiment in global markets has sent the USD on a strong rally in recent weeks and months. That has seen the EGP strengthen against the GBP, JPY and EUR as the three big currencies have lost ground against the greenback.

Currency defenders, assemble? Speculation is rising that major central banks could launch coordinated action to defend their currencies against the greenback, which has surged to two-decade highs this year, Bloomberg reports, citing the latest MLIV Pulse survey. Around 45% of the 795 respondents expect countries to begin working together to tackle USD strength, which is putting increasing amounts of stress on weaker economies and commodity importers which have been hit by the economic impact of the war in Ukraine.

China is first mover: The Chinese central bank has instructed state-owned banks to have offshore branches prepared to sell USD and buy CNY as it intervenes to prevent further depreciation of its currency, which has fallen to its lowest level against the greenback since 2008. (Reuters)

Take our EV survey: Are you an ex-petrolhead shopping around for your first electric vehicle? EV-curious and wondering what all the fuss is about? Or are you not ready to say goodbye to that sweet smell of benzene as you wait at the gas station?

We want to hear from you: We’re taking the pulse on how the nation feels about Egypt’s nascent EV transition. Take a few minutes to fill out our short survey. We’ll be back with the results in a couple of weeks.


It’s PMI day: S&P Global will release September’s purchasing managers’ index (PMI) at 6:15 CLT this morning. You can catch it here. The downturn in Egypt’s private sector eased in August on the back of slowing inflation but remained firmly in contraction territory as the fallout from the war in Ukraine continued to impact the economy. The Saudi PMI is also due out today, while the UAE gauge will follow tomorrow.

Austrian water companies continue investment talks in Egypt: Eight Austrian water companies are in Egypt (pdf) to meet with government officials and local business leaders to discuss investment in Egypt’s water, wastewater and desalination projects

The Nobel Prize laureate(s) for physics will be announced today at the Royal Swedish Academy of Sciences in Stockholm. Swedish geneticist Svante Pääbo was awarded the prize for physiology or medicine yesterday for his work on mapping the genome of Neanderthals.

Up next:

  • Chemistry — Wednesday
  • Literature — Thursday
  • Peace — Friday
  • Economics — Monday, 10 October

PSA #1- We’re approaching the final long weekend of the year: Banks and the stock market will be off on Thursday, 6 October, in observance of Armed Forces Day, according to the Central Bank of Egypt and the EGX. The cabinet had already announced the holiday for both public and private sector workers. For those who usually work Saturdays, this coming Saturday, 8 October, is also an official holiday to mark the Prophet Muhammad’s birthday.

Those are the final holidays for 2022, boys and girls. Your next day off will be 1 January (falling on a Sunday and traditionally a holiday for banks) and then Coptic Christmas (January 7, which falls on a Saturday in 2023).

PSA #2- Fall weather looks like it’s here to stay. You can expect sunny skies and cooler weather this weekend. Look for the mercury to peak at 30°C on Thursday in the capital city (28°C in Alexandria) and an overnight low of 17°C. The long-range forecast on our favorite weather app shows temps won’t break above 28°C in Cairo during the day for the next two weeks.


Expect a significant oil supply cut when OPEC+ meets on Wednesday as the alliance of oil producers intervenes to support prices, which have fallen to 2022 lows on elevated recession risk, but have picked up again on the news. Brent crude futures jumped nearly USD 4 a barrel (up 4.4%) on the news to USD 88.86 yesterday, bucking weeks of declines on fears that a coming global recession would dent demand.


UNCTAD says global recession is a choice, not an inevitability — and there’s still time for policymakers to switch into reverse. “There is still time to step back from the edge of recession,” said UN Conference on Trade and Development head Rebeca Grynspan, calling the matter one of “policy choices and political will.”

Tighter times spell suffering for EMs: Grynspan warned that stringent monetary tightening in developed economies — paired with a lack of safety-net mechanisms for the world’s most vulnerable — could trigger a wave of debt defaults in emerging markets and plunge the economy into a stagnation worse than the 2007 financial crisis. She made the comments on the launch of a new UNCTAD report titled “Development prospects in a fractured world,” which paints a grim picture for global growth amid high inflation.

US stocks perked up when September ended: US equities rallied on their first day of October trading yesterday after closing out a bad 3Q with historic drops in September. A U-turn from the British government on its controversial mini-budget (which last week sent the GBP tumbling and almost crashed the country's pension market) helped spur gains in all three major US indices, the Financial Times reports, with the S&P 500 and the Nasdaq notching their best daily performances since August. The WSJ and Reuters also had the story.

The bears aren’t done yet: “What we’re seeing today is not necessarily healthy. People are very hopeful and wishful and want to put September behind them, but the underlying problems are still out there,” one strategist told the FT.

COUNTDOWN TO COP (34 days to go)-

Pre-COP27 is underway: Foreign Minister Sameh Shoukry is in the Democratic Republic of Congo, where Egypt is co-hosting a pre-COP meeting of some 50 environment ministers from around the world. During his opening remarks, Shoukry highlighted the effects of climate change in Africa and the challenges this poses to the continent’s development, and stressed the “implementation” theme of this year’s COP, according to a statement. On the sidelines of the event, UN chief Antonio Guterres told reporters that “solidarity and decisive action” is the only solution to the climate crisis.

International Cooperation Minister Rania Al Mashat gave the opening remarks this morning at a conference on blended climate finance hosted by the Monetary Authority of Singapore in cooperation with McKinsey and the Global Blended Finance Alliance, according to a statement. Al Mashat is also set to hold meetings with Singaporean officials and international financial institutions on the sidelines of the conference.

A rare warning from Egypt to the UK not to abandon its climate agenda: Egypt is warning the UK over fears regarding newly-appointed UK Prime Minister Liz Truss’ climate priorities — or lack of them, the Guardian writes. This comes shortly after news broke that UK’s King Charles III will not be attending COP27 at Truss’ request. “We hope that this doesn’t indicate that the UK is backtracking from the global climate agenda after presiding over COP26,” a COP27 spokesperson said.

Charles may be a no-show — but 90 state heads and counting will soon start packing for Sharm. Some 90 state heads have so far confirmed their attendance at COP27, said special representative for the COP27 presidency Wael Aboulmagd, adding that the confirmations keep pouring in, according to Reuters.


UPCOMING NEWS TRIGGERS- Here are some data points and news triggers to be on the lookout for in this month:

  • Foreign reserves: The Central Bank of Egypt (CBE) should be out with September’s foreign reserves figures later this week. Reserves remained flat at around USD 33.1 bn in August, having fallen 20% since March due to headwinds caused by the war in Ukraine and tightening financial conditions.
  • Inflation to notch new highs? Analysts are expecting inflation to have continued rising in September due to the weakening EGP after reaching highs not seen since November 2018 in August. We’ll find out when Capmas and the CBE release the figures next week.

Fuel prices to rise this month? We’re expecting the government to hike fuel prices for the seventh consecutive quarter when the fuel pricing committee meets this month. Fuel prices have risen by as much as 28% over the past 18 months in response to heightened international oil prices, which surged earlier this year on the back of Russia’s invasion of Ukraine.

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


*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: We talk to Hisham Badr, head of the Smart Green Governorates initiative, to find out more about the program in the lead-up to COP27.

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