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Egypt pound weakens on black market as central bank holds official rate
(REUTERS): Egypt’s central bank held the pound steady at the official rate on Tuesday, but the currency weakened to a new low on the black market amid a widespread dollar shortage and growing pressure to devalue.
The central bank said it sold $118.1 million at its regular sale of foreign currency, with the cut off price stable at the official rate of 8.78 per dollar.
Dollars were selling at 16.10 pounds on the black market, weaker than levels closer to 15.5 pounds quoted last week, traders said. They did not give volumes.
Egypt has struggled to earn dollars since a 2011 revolt drove away tourists and foreign investors, key sources of foreign currency. Its efforts to defend the pound against downward speculation further drained reserves from $36 billion before the uprising to $19.6 billion at the end of September.
A Saudi decision to suspend shipments of petroleum products to Egypt this month has forced Egypt to burn more than $500 million on oil, adding further pressure on the reserves.
Economists widely expect Egypt to devalue as part of a comprehensive reform programme aimed at cutting the budget deficit and rebalancing markets. Egypt’s government hopes to clinch a $12 billion IMF loan programme this year to support its efforts.
Egypt seeks new Suez Canal toll deal with global shipping lines
(REUTERS): Egypt is in talks with global shipping firms to change the way it charges vessels to pass through the Suez Canal, offering discounts for advance payments as it seeks to raise much-needed hard currency from a struggling industry.
Denmark’s A.P. Moller-Maersk, which runs the world’s biggest container shipping line, said on Tuesday it was considering proposals from the Suez Canal Authority for a new toll system.
“They have proposed a new payment method and presented it to us, and we are looking at it now,” a spokesman for its Maersk Line shipping arm said, confirming a newspaper report and that advance payments were under discussion.
The Suez Canal is one of the main sources of foreign currency for a country that has struggled to overcome a crippling dollar shortage since an uprising in 2011 caused an exodus of foreign investors and tourists.
Egypt aims to double its revenue from the Canal by 2023 with the construction of an extension to the waterway that was completed this year.
Canal Authority Chairman Mohab Mamish was quoted as telling the Wall Street Journal it was now looking to levy charges three or five years in advance in exchange for a 3 percent discount.
Traffic though the waterway linking the Mediterranean and Red Sea has been hit by fallout from the political instability as well as a slowdown in global trade.
That slowdown, together with a glut of vessels, has left the container shipping industry struggling with its worst ever market conditions, battering earnings and forcing one major player – South Korean container line Hanjin – out of business in August, leaving an estimated $14 billion of cargo stranded.
Mamish told the newspaper on Tuesday that talks with Maersk, Geneva-based Mediterranean Shipping Co. and France’s CMA CGM were going well, and that an agreement on a new system for the start of 2017 might be reached as early as next week.
Egyptian President Abdel Fattah al-Sisi inaugurated an $8 billion expansion of the Suez Canal in August 2015 with a view to doubling daily traffic and increasing annual revenue to more than $13 billion by 2023.
But its receipts declined by 4.5 percent to $5.1 billion in the year to June, when Egyptian exports totalled $18.7 billion.
Telephone calls to Mamish and his office in Egypt were unanswered on Tuesday. CMA CGM had no immediate comment.
Representatives of the major container shipping companies are meeting this week at a conference in Copenhagen. It was unclear if the potential discounts on offer might persuade them to increase their use of the canal.
With rate hikes likely, Egypt bankers advised to shield bond holdings
Egypt’s central bank has advised some banks to redesignate their bond holdings so they cannot be traded on the secondary market, bankers told Reuters on Tuesday, a move they said was intended to shield lenders from an expected spike in interest rates.
Economists widely expect a steep devaluation in the pound but say such a bold move would be accompanied by a significant hike in key interest rates to stabilise the currency, attract inflows and avoid dollarisation.
Three bankers told Reuters on Tuesday that the central bank had verbally instructed them to reclassify “available for sale” bonds and bills, which are tradeable on the secondary market, as “held to maturity”.
That would mean they do not have to mark the bonds’ value to market, protecting the banks in question from a major hike to benchmark interest rates which would decrease the capital value of the bonds and hit the overall value of bank holdings.
There was no official statement from the central bank. Central bank officials contacted by Reuters did not respond to requests for comment.
“What the central bank is doing is protecting banks from making huge losses on their portfolios, revaluation losses, which could occur if interest rates rise,” one banker at a private sector bank said.
“This hints at a huge hike in interest rates. It sends a very strong signal that a large devaluation is imminent and that there will be interest rate hikes to accompany.”
Egypt has struggled to earn dollars since a popular uprising in 2011 caused an exodus of tourists and foreign investors, its chief sources of hard currency.
The dollar shortage has put downward pressure on Egypt’s pound, which the central bank sets at 8.8 to the dollar but which has depreciated to about 16 pounds on the black market.
Large losses in treasury bills and bond portfolios could push banks below the required capital adequacy ratio and the bankers suggested this was the chief motivation for the move.
Many Egyptian banks have a high level of exposure to government debt which has traditionally been seen as a safe, high-yielding investment.
The central bank’s Monetary Policy Committee is next due to meet on Nov. 17 and economists widely expect it to raise rates.
“The verbal instructions were conveyed to selected banks, both state-owned banks and private ones, based on the size of their bond portfolios of maturities between three and 10 years and more,” a source at a public bank told Reuters.
The central bank has already made significant interest rate increases this year but surprised markets by holding its policy rates steady at the last MPC meeting.
Egypt is in the process of securing a $12 billion International Monetary Fund loan to back a government reform programme aimed at slashing the government deficit and rebalancing its money market.
Saudi Aramco did not notify Egypt on arrival of November oil cargo yet: official
The Saudi Aramco Co. did not verbally or officially notify the Egyptian government about the shipping and arrival of November oil cargo yet, an official from the Egyptian Ministry of Petroleum told Youm7 on Tuesday.
He the official who spoke on condition of anonymity as he was not authorized to brief the media added that deal contract between Egypt and the Saudi Company is still valid.
In early October, Aramco suspended the oil supply to Egypt for October, stating no reasons behind the suspension. However, this move came after Egypt has voted for a Russian-drafted resolution on Syria at a meeting in the United Nation Security Council (UNSC), a step stirred Saudi Arabia’s anger.
In case that Aramco abstained from supplying the oil cargo to Egypt for November, the Egyptian General Petroleum Corporation (EGPC) will put in a tender to import its oil needs, the official continued.
Loan agreement with IMF to be signed in 2 months: PM
Prime Minister Sherif Ismail announced that a loan agreement with the International Monetary Fund (IMF) is expected to be signed by the end of 2016.
“Egypt will receive the first tranche totaling $4 b early 2017 but we must stick to the reform process and devalue the Egyptian Pound if we are to secure further payments of the loan,” said Ismail in the interview aired on the privately-owned channel CBC on Monday.
The $12 billion loan facility that the International Monetary Fund has preliminarily agreed to provide for Egypt will be divided into three tranches, each worth $4 billion, the fund’s mission chief Chris Jarvis told Al Ahram in August.
During the interview, Ismail said the government is working “on all tracks” and that investment is not just a new law to be issued, but the government seeks to find several incentives to encourage foreign investments.
Egypt Suez Canal revenue rises to $447.6 mln in August
(Reuters) Egypt’s Suez Canal revenue rose to $447.6 million in August compared with $429 million in July, data from the Cabinet Information Center showed.
The canal is one of Egypt’s main sources of foreign currency. Egypt has been struggling to revive its economy since a 2011 uprising scared away tourists and foreign investors, other main sources of hard currency.
Egypt has seized 9,000 tons of sugar in raids so far
Egypt has seized 9,000 tons of sugar in recent raids on factories and warehouses, the prime minister said on Monday, describing the move as necessary to deal with a shortage of the commodity.
Sugar has all but vanished from supermarkets, prompting media talk of a crisis and pushing the state to rapidly increase imports despite an acute dollar shortage and soaring global prices of the sweetener.
Egyptian authorities have raided sugar factories and distributors in recent days as they blamed traders and suppliers for hoarding and smuggling supplies.
Prime Minister Sherif Ismail told Egypt’s CBC channel in an interview that the raids have had a “positive impact” and sugar stocks were enough to cover the country for three months.
“There are some negative points that we are dealing with but they were a limited number of cases,” he said. “We can’t leave the market without supervision. … Monitoring is necessary.”
Edita Food Industries, Egypt’s maker of Twinkies, said on Monday its sweet factory in Beni Suef had been shut for three days after authorities seized its sugar.
Edita said it was holding normal levels of sugar stocks obtained legally from the private sector and not the black market, which the government is trying to dry up through the ongoing raids.
Egypt consumes around 3 million tons of sugar annually but produces just over 2 million tons. The gap is filled by imports, usually between July and October when local beet and sugar cane supplies have wound down.
Egypt to issue $2 bln in international bonds, roadshow in Nov
(Reuters) – Egypt will issue roughly $2 billion in international bonds, less than previously announced, and will begin a roadshow for the planned offering in the second or third week of November, Finance Minister Amr El Garhy said on Monday.
Egypt has been negotiating billions of dollars in aid from various lenders to help revive an economy battered by political upheaval since the 2011 revolt and ease a dollar shortage that has crippled import activity and hampered recovery.
Egypt said in August it planned to issue $3 billion to $5 billion in international bonds at the end of September.
Garhy told an American Chamber of Commerce event in Cairo that the bond was now likely to be marketed next month, and said later in the day that the amount would likely be lower than previously announced.
“We’re talking about $2 billion, give or take, but it will be in this range, depending on market circumstances,” Garhy said later on Monday during a television interview.
USD exchange rate ‘stable,’ reaches 8.78 EGP
The USD exchange rate has been stable against the Egyptian Pound, where it reached Tuesday 8.58 EGP for sale and 8.88 for purchase. Euro exchange rate reached 9.76 EGP for purchase and 9.78 EGP for sale.