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Sunday, 13 November 2022

Egypt can cover USD 16 bn financing gap, says Maait

More funding, investments coming in “days, weeks, months” -Maait: Egypt expects to see more FDI and more funding inflows, including from the Gulf and “other sources,” after reaching a staff-level agreement with the IMF for a USD 3 bn, 46-month loan, Finance Minister Mohamed Maait told Bloomberg on Thursday (watch, runtime: 6:33). These sources of funding should be arriving within the next “days, weeks, and months,” Maait said, without providing further details on the size or timeline for these anticipated inflows. He did note that Qatar’s sovereign wealth fund deposited USD 1 bn at the Central Bank of Egypt last week.

The IMF program + support from multilateral lenders will help us cover USD 16 bn financing gap: Egypt’s external funding gap over the next four years is expected to come in at USD 16 bn, but the Finance Ministry is confident that it will be able to find the money. “We are sure about getting this financing gap” covered during the loan period, Maait told the business newswire. The minister said this will happen with a combination of the USD 3 bn from the IMF, another USD 5 bn the IMF program helped us secure from multilateral lenders — which he said will likely land in state coffers during the current fiscal year — and more debt issuances and investments.

Egypt is searching for new sources of funding: With Egypt’s access to Western capital markets heavily curtailed, the government is continuing to focus on diversifying its funding sources, the minister said. “We are now in a good stage for issuing a USD 500 mn panda bond in Chinese capital markets [and] we are working on sukuk for private placement and also a public offering in international markets,” the minister said. “We’re trying to diversify at this stage and depend more on MDBs’ concessional loans,” as well as financing for green projects, he said.

Portfolio inflows are starting to trickle in, but we’ve learned our lesson: Portfolio investors have slowly started to dip their toes back into the EGP carry trade in the wake of the IMF announcement, but the lesson remains that “this kind of inflows is not secure” and that the priority should be to focus on attracting FDI and boosting exports, Maait said. Egypt has seen at least USD 20 bn in portfolio outflows this year due to tightening financial conditions and the economic shock caused by the war in Ukraine.

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