EgyptInsightsMacroeconomic updateMonetary Policy

9 November 2023


In brief

  • The Central Bank of Egypt retained the deposit rate at 19.25% in its November 2023 MPC meeting. The rate decision was in line with consensus amidst a slight uptick in September 2023 inflation print.
  • Favourable base effects notwithstanding, recent price adjustments on fuel products and increased excise tax on tobacco implies sticky inflation in the near-term. The emergence of parallel FX rate and negative spillover effects from a prolonged Israeli-Gaza escalation tees up external sector risk, and inflation outlook.
  • With the December 2023 polls on the horizon, the delayed combined first and second IMF reviews under the current USD 3.0bn programme are likely to be finalized in early 1Q2024, to enable the Fund and the authorities map out applicable quantitative performance criteria and indicative targets for the current FY24.
  • The volatility in the USD-denominated Eurobond markets has seen Egypt raise USD 1.0bn-equivalent in non-USD denominated bonds. Egypt raised CNY 3.5bn (USD 500.0mn) in its debut 3.5% 2025 panda bond in October 2023 and followed up last week with JPY 75bn (USD 500.0mn) 1.5% 2027 samurai bond via private placement.
  • Considering the emerging risks across its eastern border, the USD 3.0bn IMF financing seems inadequate to cover financing needs in the medium term. Given Egypt’s programme financing size equivalent to 115.4% of its quota, there is a likelihood of upscaling against the backdrop of IMF’s recent proposed across-the-board 50.0% increase in quota limit from next month.
  • Since early October 2023, all the three major credit rating agencies downgraded Egypt’s long-term ratings, with Moody’s Caa1 a notch lower on comparable basis. Nevertheless, Moody’s stable outlook reflects continued external financial support more so from the Gulf Cooperation Council (GCC) countries.

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