UPDATE – Egypt’s business digest Oct. 31: Egyptian pound tumbles on black market; importers delay buying
Egyptian Pound - YOUM7

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Egyptian pound tumbles on black market; importers delay buying

 

(REUTES): The Egyptian pound’s decline against the dollar accelerated on the black market but at lower volumes, as rising prices led importers to put off purchases, five traders and importers told Reuters on Monday.

Egypt’s black market for dollars has flourished since a 2011 uprising scared off foreign investors and tourists, the country’s major sources of foreign currency.

The central bank has been rationing dollars and imposing capital controls as it maintains an artificially strong pound at 8.8 per dollar. Importers who had to pay a premium for dollars on the black market now say the rate has risen too high.

Three currency traders were buying dollars on Monday for 17.5 to 17.85 pounds and selling them to importers for 18 to 18.2 pounds, but they said volumes were low. Six days ago, they were selling dollars at 16.1 pounds.

                  

Fitch: Acquiring Egyptian Banks Adds Risk but Can Boost Profit

 

(The following statement was released by the rating agency)

LONDON: Buying an Egyptian bank brings risks to North Africa and Gulf-based acquirers but can offer good expansion and diversification opportunities, and boost group profits over the medium to long term, says Fitch Ratings. Margins achieved by Egyptian banks are high, averaging 3.7%, and the Egyptian banking sector reported average returns on equity and assets of 18.9% and 1.3%, respectively, in 2015. The ownership of some of Egypt’s foreign-owned banks continues to change as Gulf and North African banks see opportunities to expand their regional coverage and large EU banks exit some developing markets as they shift their business models. Barclays is selling its Egyptian operations to Morocco’s Attijariwafa Bank, which follows the sales in 2012 and 2013 by Societe Generale and BNP Paribas of their Egyptian subsidiaries to Qatar National Bank and Emirates NBD, respectively. But investing in one of Egypt’s banks can be risky because they operate almost entirely in the volatile domestic market. The depreciation of the Egyptian pound can be significant, exposing parent banks to exchange-rate risks, and Egyptian subsidiaries are not always free to upstream dividends to their parents due to the imposition of capital controls and restrictions on foreign-currency (FC) remittances. FC lending represents about 30% of sector lending and funding is largely matched by FC deposits, but FC borrowers might find it difficult to service their loans if their revenues are not denominated in FCs and local-currency depreciation makes repayments more expensive. In addition, the central bank’s US dollar auctions are sporadic and the supply of FC is insufficient to clear the backlog of banks’ requirements. This leads to shortages of FC and pressure on FC liquidity in the banking system. Concentration risks can also be high across the sector as banks compete for quality lending opportunities and invest heavily in domestic ‘B’-rated government bonds. Overall, however, asset-quality indicators are holding up well in Egypt. At end-2015, impaired loans represented 6.8% of total sector loans and impairments were almost fully reserved. This is in line with loan-quality indicators achieved by Moroccan banks but higher than the impaired loans ratios across Gulf Cooperation Council banks – which range from an average of 1% for Saudi Arabian banks to 5% for those in the UAE. Egypt’s banks are a strength in our assessment of the sovereign’s rating of ‘B’ with a Stable Outlook but the overall economic environment remains difficult and this poses a challenge to the banking sector. Economic growth has slowed in 2016, due to shortages in foreign currencies and poor performances by tourism and manufacturing. We assume that growth will strengthen modestly in 2017 to 3.6% from 3.2% in 2016 and reaching agreement with the IMF for a USD12bn loan is positive, although implementation risks are high.

“I am not convinced with these prices … it is not real demand,” said one importer who quit buying because of the cost of dollars. “There is a decision by importers to stop importing for a few months to cool the prices down.”

The pound has been tumbling almost daily on the black market since Saudi Arabia halted petroleum aid to Egypt this month, forcing it to spend $500 million for oil products on the spot market.

The Federation of Egyptian Chambers of Commerce issued a statement this week that said trading of foreign currencies in Egypt had “exceeded its fair price due to ongoing speculation”. It called on its members to stop buying foreign currencies for two weeks and to cut down on imports.

A commodities trader said he was quoted 18.25 per dollar. Prices are mostly being driven by panic rather than real demand for the dollar, he said.

“Everyone is in panic … The Sudanese pound now is stronger than the Egyptian pound,” the trader said. “Is the economy here worse than Sudan? This is all people panicking and turning their Egyptian pounds in to dollars.”

The trader said he expects the dollar will stabilize at 13 or 14 pounds in a few weeks, after Egypt secures a $12 billion loan program from the International Monetary Fund.

Egypt is waiting for IMF board approval of the three-year program. In return, Egypt must carry out economic reforms, including a devaluation of the pound and painful subsidy cuts.

The central bank devalued the pound by almost 14 percent in March, briefly closing the gap with the black market. The renewed weakening has increased pressure on the central bank to devalue again.

The country has been trying to rebuild its reserves, which are currently around $19.5 billion, far lower than the $36 billion in 2011.

 

Egypt M2 money supply up 18 pct year-on-year in September -c.bank

 

(REUTERS): Egypt’s M2 money supply was up 18 percent at the end of September from a year earlier, the central bank said on Monday.

The money supply stood at 2.18 trillion Egyptian pounds($245.5 billion), it said.

 

 

Upper Egypt Flour Mills FY net profit rises

Oct 31 Upper Egypt Flour Mills SAE :

* FY consol net profit EGP 117.2 million versus EGP 104 million year ago

* Proposes FY dividend of EGP 7.5 per share

 

 

Egypt’s GDP growth climbs to 4.3 pct in 2015/16 – Prime Minister

(Reuters) Egypt’s gross domestic product (GDP) growth for 2015/16 climbed to 4.3 percent from 4.2 percent in the previous year, Egypt’s Prime Minister Sherif Ismail told Reuters on Monday.

The budget deficit widened to 12.1 percent, Ismail said, from 11.5 percent a year earlier.

The prime minister’s GDP figure differed from a report from two finance ministry officials earlier on Monday that Egypt’s GDP grew 3.8 percent in 2015/16. Both figures were lower than the targeted growth of 5 percent for the year.

 

Egypt’s 2015-2016 budget deficit widens to 12.2 pct, GDP growth slows to 3.8 pct-officials

(Reuters) Egypt’s budget deficit for 2015-2016 reached 12.2 percent, up from 11.5 percent a year earlier, Deputy Finance Minister for Treasury Affairs Mohamed Muait told Reuters on Monday.

Two other finance ministry officials said that growth for the year reached 3.8 percent, lower than the targeted growth of 5 percent, and down the 4.2 percent growth in the previous year.

 

Egypt talks with WFP to ‘widen’ food aid to poor students

Egyptian Minister of International Cooperation Sahar Nasr met with World Food Program Director-General Menghestab Haile on Sunday to discuss the ways of widening food aid to larger amount of students over 14 governorates to stop the phenomena of dropping out the schools and the child labor.

In September 2014, Egypt, EU, and WFP have signed an agreement, per which a 60 million euro ($77 million) project aimed to reduce child labor in Egypt and encourage access to education over the next four years.

 

Egypt’s Ministry of Finance borrows 2 bln in T-bonds

Egyptian Ministry of Finance, via the Central Bank of Egypt (CBE), will borrow a total of 2 billion EGP in treasury bonds (T-bonds) on Monday, according to the CBE data.

The offer is divided into two installments; the first auction is worth at 1.5 billion Egypt for three-year term, while the second seven-year-term offer is worth 0.5 billion EGP.

It is expected that the state’s general budget deficit could reach 322 billion EGP by the end of Fiscal year of 2016/2017. Auctioning the treasury bills and bonds are the government’s financial tools of borrowing.

 

USD exchange rate ‘stable,’ reaches 8.78 EGP

The USD exchange rate has been stable against the Egyptian Pound, where it reached Monday 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.

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