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Wednesday, 5 October 2022

THIS MORNING: Just a few short hours until the long weekend

Good morning, wonderful people. We’ve got a steady stream of news this morning to see us into the long weekend.

Say “long weekend” once more — you won’t be hearing that phrase again until 2023. Banks and the stock market will be off tomorrow in observance of Armed Forces Day — the final long weekend of the year — according to the Central Bank of Egypt and the EGX. 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.

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).

EnterprisePM will be out as usual this afternoon and readers of Enterprise Climate will have their morning read in their inboxes tomorrow. Both our AM and PM editions in Egypt are off tomorrow — we’ll be back in your inboxes at the usual time on Sunday morning.


THE BIG STORY HERE AT HOME? It’s all about the EGP, and it seems we’re going to have to keep holding our breath a little bit longer to see how it plays out.

FOR STARTERS- MPs have summoned senior cabinet ministers to discuss the import and FX crisis. The finance, planning, and trade and industry ministers will appear before the House Industry Committee next week to discuss the pileup of goods at ports and the availability of FX, committee head Moataz Mahmoud tells Al Mal. President Abdel Fattah El Sisi has in recent days urged the government and the central bank to normalize the situation by November. The president also said yesterday in a televised address that he’s confident we’ll make it through this bottleneck (we have more on that in Last Night’s Talk Shows, below).

The news came as the EGP continued its slow slide against the USD yesterday, easing four piasters against the greenback to 19.7084. The EGP has been marking fresh record lows against the US currency in recent days, after it last week breached the record 19.5605 low set five years ago on the back of the historic 2016 float.

The EGP has lost around a quarter of its value this year against the greenback thanks to a toxic mix of domestic economic pressures, the global economic fallout from Russia’s war in Ukraine, and the strengthening of the USD against just about every major global currency. The central bank went for a snap 15.9% devaluation in March, with the rest of the slide happening in gentle (but steady) increments since then.

Where will it settle? Enterprise readers see the EGP dropping to 22.12 — the figure they’re using (on average) for their 2023 budgets, according to our fall 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. Bloomberg, which has been leading the charge for a weaker pound, is now saying that some market watchers are calling for an end to the “drip, drip, drip” devaluation in favor of a more sudden move. Bloomberg Economics thinks a rate of EGP 24.60 to the greenback would “bring Egypt’s trade deficit to a reasonable level.”

ENTER THE IMF: Speculation about how much Hassan Abdalla’s central bank will allow the currency to slide is mounting after the IMF signaled that it is working on a “sizeable” assistance package for Egypt that could get approval “within days or weeks.”

The IMF executive board would have to approve the facility — and Egypt does not currently appear on the institution’s public calendar ahead of the IMF and World Bank annual meetings set to take place next week. So, yeah: We’re going to have to keep holding our collective breath for a little while longer, folks.

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***

WHAT’S HAPPENING TODAY-

The world is bracing for a significant oil cut when OPEC+ meets today. The cartel of oil producers is expected to slash daily production by more than 1 mn barrels in a bid to bring up prices, which have sagged after spending March through July comfortably above the USD 100 / barrel barrier. Public figures in the US are positioning the Saudi led move as playing into Vladimir Putin’s hands. The Financial Times notes the move could anger the US.

The hometown angle: Policymakers here have penciled oil in at about USD 80 per barrel in the 2022-2023 state budget. Brent crude was at about USD 85 last week — and is hovering just under USD 92 this morning. There’s no word yet on when the Oil Ministry’s petroleum products pricing committee will next meet to set prices at the pumps here in Egypt/

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 chemistry will be announced today at in Stockholm. The Nobel Prize in Physics was awarded yesterday to Alain Aspect, John Clauser and Anton Zeilinger for their work on quantum-information science.

NEXT WEEK-

IMF + WB annual meetings: The IMF and World Bank annual meetings will take place in Washington, DC, on 10-16 October.

COUNTDOWN TO COP (33 days to go)-

The British Embassy in Egypt launched its Climate Finance Accelerator (CFA) program yesterday. The GBP 10.8 mn, four-year technical assistance program will build a pipeline of bankable low-carbon projects and give them access to financing. Piloted in Colombia, Mexico and Peru, the CFA is now looking to expand in Egypt, Nigeria, Pakistan, South Africa and Turkey. The program — which is looking to select 8-12 projects — is currently accepting proposals for projects seeking USD 1 mn in funding. You can apply here through 16 October.

Who is involved? The program is funded by International Climate Finance (ICF) through the UK government’s Department for Business, Energy and Industrial Strategy. It is being delivered locally by PricewaterhouseCoopers UK, and implemented by Genesis Analytics and Acumen Consulting Egypt.

Egypt’s FRA and UK’s FDS Africa also signed an MoU on environmental ins. at the ceremony: Egypt’s Financial Regulatory Authority and the UK’s Financial Sector Deepening Africa signed an MoU to explore ins. products for issues pertinent to the environment. More on all of this in the embassy’s press release (pdf) on the event, out overnight.

Enterprise Climate attended yesterday’s launch — and sat down with UK Ambassador to Egypt Gareth Bayley, where they talked about King Charles II not attending COP27 in person and how newly-appointed UK Prime Minister Liz Truss will tackle climate development financing for Egypt.

^^ We’ll have the full story in tomorrow’s edition of Enterprise Climate.

African countries will lobby for a shared energy position at COP27, highlighting the importance of fossil fuels for economies and securing access to electricity in the short term, Reuters reported. While the use of fossil fuels may be a viable option for some countries, it is not a one-size-fits-all solution, African Union Commissioner for Infrastructure and Energy Amani Abouzeid said, according to the newswire.

THE BIG STORY ABROAD- Elon Musk may be buying Twitter after all in a bid to head off a costly lawsuit. With just two weeks to go before Musk and Twitter were set to tangle in court, the Tesla and Space X boss sent a letter to Twitter on Monday night saying he was in for the original USD 44 bn transaction — contingent on debt financing coming into place and the court agreeing to scrap the trial. Musk tweeted yesterday that “buying Twitter is an accelerant to creating X, the everything app.”

Need to go deeper? Check out coverage in the Financial Times | Wall Street Journal | Reuters | Bloomberg. Or get into the nitty-gritty with Casey Newton’s Platformer.

The story that we’re more interested in: China’s property crash: “a slow-motion financial crisis.” It’s the first in a series from the FT that says the “impact of falling house prices is spreading to local government finances and the broader economy.”

MEANWHILE- Bridgewater founder (and Principles author) Ray Dalio has handed over control of his firm, stepping down as co-head of investment at the asset manager, which has USD 150 bn in assets under management. The move caps a yearslong succession process. The WSJ has more.

AND IT’S OFFICIAL- Apple will bid farewell to its beloved Lightning port. The European Commission has passed a law requiring all new electronics sold in the EU to be equipped with a USB-C charging port by 2024 — including mobile phones, tablets, cameras, games consoles, headphones, and speakers. Laptop-makers have until 2026 to comply with the decision

CIRCLE YOUR CALENDAR-

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.

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*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: Renewables and diesel fuel could contribute more to our electricity generation as natgas is directed for export to help generate hard currency.

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