Update Egypt’s business digest Nov. 3: IMF’s Lagarde says Egypt currency float is “welcome move”
IMF general director Christine Lagarde - REUTERS
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IMF’s Lagarde says Egypt currency float is “welcome move”

REUTERS-International Monetary Fund managing director Christine Lagarde on Thursday called Egypt’s historic currency devaluation a “welcome move” that showed a serious approach by the government to deal with Egypt’s economic problems.

The Egyptian central bank floated the pound on Thursday, devaluing it by 32.3 percent to an initial guidance level of 13 pounds to the dollar, following weeks of turbulence and mounting pressure to reform the economy.

“This is a welcome move given the economic circumstances,” Lagarde told Reuters on the sidelines of an IMF economic conference in Washington. “The way in which it is handled is welcomed and it’s a decision clearly that the Egyptian authorities have matured and deliberated and are putting in place for the Egyptian economy and for the Egyptian currency.”

She declined to comment when asked whether the move would be enough to secure IMF board approval for a proposed $12 billion IMF loan program for Egypt.

 

EGX closes on mixed note, gains 11.47b EGP

The Egyptian Exchange (EGX) closed on a mixed note Wednesday, backed by purchase operations by institutions and Arab and foreign investment funds, Youm7 reported.

The main benchmark index EGX30 went up 3.35 percent to close at 8,810 points.

Similarly, the small and medium caps index EGX70 went down 1.83 percent to close at 351 points, while the equal weighted index EGX50 added 1.7 percent to close at 1,370 points.

The market capitalization gained 11.47 billion EGP to close at 428.7 billion EGP during Thursday’s closing session.

 

$5 m sold to national bank of Egypt hours after liberalization of exchange rate: chairman

More than $5 million were sold to the National Bank of Egypt (NBE) in the past few hours after a decision to liberalize the exchange rate of the Egyptian pound by the Central Bank of Egypt, NBE Chairman Hesham Okasha was quoted by Youm7 on Thursday.

The “courageous and successful” decision to liberalize the exchange rate of the Egyptian pound will help the flow of foreign investments, said Okasha.

The bank will establish a foreign exchange company with a capital of 50 million EGP to start operating with the new year, he added.

 

NBE chief says Egypt’s central bank does not plan to sell $4 bln at auction

(Reuters) – The chairman of National Bank of Egypt, the country’s largest state-owned lender, said the central bank had sold $100 million to banks at a special auction on Thursday and did not plan to sell $4 billion.

“There is no intention to sell $4 billion in another auction,” NBE Chairman Hisham Okasha told reporters. Bank treasurers had earlier said that the central bank had only offered $100 million as announced.

 

Egypt’s non-oil business activity drops to 39-month low in October -PMI

(Reuters)-Business activity in Egypt shrank for the 13th consecutive month in October, with output falling at its sharpest pace since 2013, a survey showed on Thursday.

The Emirates NBD Egypt Purchasing Managers’ Index (PMI) for Egypt’s non-oil private sector dropped to a 39-month low of 42, falling far below the 50 mark that separates growth from contraction.

The index showed new orders dropping sharply to 36.4 from 44.8 in September on the back of high inflation and as the Egyptian pound weakened against the U.S. dollar.

Egypt has contended with a growing shortage of dollars that has made its black market the primary source of hard currency for businesses since a 2011 uprising scared off foreign investors and tourists, key sources of dollars.

The central bank floated the pound currency on Thursday, devaluing by 32.3 percent to an initial guidance level of 13 pounds per dollar in a move to rebalance currency markets after weeks of turbulence.

The PMI showed purchasing prices rose in October to their highest levels since data collection started in 2011 as a result of the weak currency.

“It is difficult to see the situation improving before an IMF agreement is signed, as the ongoing FX shortage and Egyptian pound weakness on the parallel market are the main factors undermining economic output at the moment,” said Jean-Paul Pigat, senior economist at Emirates NBD.

Egypt reached a preliminary agreement with the International Monetary Fund in August for a three-year $12 billion loan programme to help plug its financing gap and stabilise the currency, and is expected to finalise the deal in November.

The PMI showed employment declined for the 17th consecutive month in October but at a slower rate than for three months.

Egypt’s official unemployment rate was 12.5 percent in the second quarter.

Egypt stocks to jump on currency float – traders

(Reuters) – Stock markets in Egypt look set to rally in massive trading volume on Thursday after the central bank floated the Egyptian pound, traders and equity analysts said.

The central bank said it had floated the pound and hiked interest rates by 300 basis points to rebalance currency markets. Bankers told Reuters they had been informed that the central bank would set an initial guidance rate of 13 pounds to the dollar at a sale at 1300 local time (1100 GMT), compared to the previous official rate of 8.88 pounds.

The central bank also said in a statement that it would abolish the priority list for imports and phase out monetary financing of the budget deficit over coming months.

“This is very encouraging news. The stock market would love this news because the bottleneck has finally been relieved,” said a Dubai-based analyst.

An equities trader in Cairo said: “There is a wave of buy orders we are receiving at the moment. I think this will outdo the rally in March.”

In mid-March, the central bank devalued the pound to 8.85 per dollar from 7.73 and simultaneously pumped nearly $200 million into the dollar-starved banking system. The stock market rallied 6.7 percent in very heavy trade that day.

Economists believe a more flexible exchange rate mechanism could help unlock billions of dollars in foreign investment.

The Dubai analyst, however, said that some foreign investors were likely to remain cautious about putting money into Egypt for now until they saw how well Egyptian authorities managed the float, and because of uncertainties overhanging emerging markets such as the U.S. presidential election.

 

NBE, Banque Misr, to offer 18-month certificates of deposit at 20 pct, 3-year cds at 16 pct -bank chiefs

 

(Reuters) – Egypt’s two largest state-owned banks will offer 18-month certificates of deposit at 20 percent and three-year certificates of deposit at 16 percent, the National Bank of Egypt and Banque Misr chiefs told Reuters on Thursday.

The move came after the central bank announced it floated the Egyptian pound earlier on Thursday, setting a guidance level of 13 pounds to the dollar, nearly 48 percent higher than the rate offered since March.

 

Egypt’s dollar bonds rally after Cairo floats currency

(Reuters) – Egypt’s dollar bonds rallied across the curve on Thursday, with some issues rising around 2 cents after the country floated its currency the pound.

The move devalued the pound by 47.7 percent to an initial guidance level of 13 pounds to the dollar and was bolstered by a 3 percentage point hike in interest rates following weeks of turbulence.

Tradeweb data showed Egypt’s 10-year government bond issued last year up 2.2 cents in the dollar while 2020 and 2040 maturing bonds rose and 0.7 and 2 cents respectively.

Egypt’s average yield premium over U.S. Treasuries shrank by 29 basis point on the EMBI Global bond index to 479 bps, the narrowest in almost a month .

 

Egypt central bank hikes interest rates 300 basis points

(Reuters) Egypt’s central bank said on Thursday it had floated its pound currency and hiked interest rates by 300 basis points in a move to rebalance currency markets.

Bankers told Reuters they had been informed that the central bank would set an initial guidance rate of 13 pounds to the dollar at a sale at 1300 local time (1100 GMT) and allow free bids and offers while the market converges on a real price.

The central bank also said in a statement that it would abolish the priority list for imports and phase out monetary financing of the budget deficit over the coming months.

 

2% increase in workers’ number in 2015/2016: CAPMAS

The number of workers reached 5.77 million in Egyptian governmental sector in 2015/2016 compared to 5.89 million persons in 2014/2015, with an increased by 2 percent, said the Center Agency for Public Mobilization and Statistics (CAPMAS) in a  report on Thursday.

“-The number of male workers reached 4.61 million in 2015/2016 compared to 4.54 million in 2014/2015, increased by 1.6%,” the report read. Meanwhile, the number of female workers declined by 14 percent to reach 1.162 million in 2015/2016 compared to 1.35 million in 2014/2015.

 

Egypt, Serbia discuss cooperation in project of reclaiming 1.5 mln feddans

Egyptian Minister of the International Cooperation Sahar Nasr met with the Serbian ambassador to Cairo Dragan Bisenic, discussing the bilateral cooperation in several fields, particularly in agriculture sector, the ministry said in a statement on Thursday.

Bisenic expressed his country’s interest in participating in the project of cultivating 1.5 million feddans in Egypt, the statement added.

 

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