Shaima Hefzy wrote:
Markets are awaiting the effects of the Ras El Hekma project deal on the North Coast in partnership between Egypt and the UAE, which was announced today, Friday, and which will result in dollar flows of $35 billion over the next two months.
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As soon as the deal was announced, the price of the dollar in the parallel market fell by more than 4 pounds at once, trading at less than 60 pounds per dollar, while non-refundable futures contracts for the Egyptian pound for 12 months fell to 57 pounds.
Prior to the announcement of the deal, Egyptian dollar-denominated sovereign bonds, maturity 2050, jumped and achieved the largest gains, rising by 1.1 cents, to be traded at about 68 cents, rising by more than two years and reaching the highest level in a year.
The rise in dollar-denominated bonds means a lower cost of insurance for Egyptian sovereign debt, which can be explained by a decrease in investors’ concern about Egypt’s ability to meet its international obligations.
With regard to international obligations, the deal will contribute to reducing Egypt’s external debt by about $11 billion registered with the Central Bank of Egypt as deposits for the Emirates, as the agreement included that these deposits be converted into funds in Egyptian pounds that will be pumped to implement the project.
Goldman Sachs Bank expected that investment flows amounting to about $24 billion from the agreement with the ADQ Holding Company, which will be pumped as dollar liquidity from abroad to implement the project, will contribute to covering the financing gap for Egypt during the next four years, which the bank had previously estimated at about $25 billion.
Easing the pressure on dollar demand will contribute to reducing the price of the dollar in the parallel market, which is expected to witness further decline in the coming period, allowing the Central Bank to reduce a “relatively modest” reduction in the official price of the pound, which may facilitate reaching an agreement with the International Monetary Fund to increase the program. Funding signed in December 2022 for more than $3 billion, with new value expected to be between $7 billion and $10 billion.
It is also expected that the price of gold in Egypt will decline if the dollar continues to decline in the parallel market, as the price of a gram of 21 carat fell by about 150 pounds to record 3,300 pounds, after the details of the project were announced and the black market price declined.
The availability of dollars in banks to pay obligations and reach an agreement with the IMF will contribute to alleviating the crisis of overcrowding of goods shipments in Egyptian ports, which will result in an increase in the supply of goods in the markets, curb inflation, and control the rise in prices.
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A significant decline in Egyptian pound futures after announcing the details of “Ras El Hekma”
2024-02-23 20:25:00
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