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Egypt sees high demand from investors after currency drop

REUTERS/Mohamed Azakir
The Egyptian pound has lost nearly half its value since March 2021 after being allowed to devalue in jump

Egypt is seeing good investor appetite for stakes in its state-owned enterprises, the country’s planning minister said, as the government pursues partial privatisations to drum up funds after a sharp fall in the value of its currency.

Egypt, faced with a currency crunch exacerbated by the war in Ukraine, recently started a $3 billion International Monetary Fund (IMF) programme that calls for reducing the state’s footprint in the economy, liberalising the exchange rate and rationalising spending.

It includes a goal of raising $2-2.5 billion by mid-year from sales before any initial public offerings on the stock market, a target planning minister Hala Al-Said told Reuters Egypt was on track to reach.

“There is a lot of appetite to the Egyptian economy. I think definitely the stock market is at its best now,” she said on the sidelines of the World Economic Forum in Davos.

Sectors under consideration include industry, agriculture, telecoms, she said, without giving any details of any particular companies or deals.

“We have great demand from different investors, high net worth individuals, sovereign funds,” she said.

Egypt’s main index rose 22.17 percent in 2022, to its highest level since 2017, and has risen a further 9.51 percent this year, according to Refinitiv data.

However, the country has long struggled to attract foreign direct investment (FDI) outside its energy sector, and the state has continued to play a dominant role in the economy.

The Egyptian pound has lost nearly half its value since March 2021 after being allowed to devalue in jumps, and inflation accelerated to 21.3 percent in December, its highest for five years.

Following the latest sharp depreciation last week, Egypt’s central bank said on Monday that foreign investors had transferred more than $925 million into the Egyptian foreign exchange market.

Egypt’s currency was facing a temporary problem given the “multiple shocks” happening globally, said Al-Said.

“I think it’s a temporary issue and we have taken already the necessary measures in the liberalisation of the exchange rate and in rationalising the foreign component of expenditure that we have, and also in terms of offering the right investment climate to ensure the influx of foreign exchange coming from FDI,” she added.

As part of that rationalisation, she said infrastructure projects that incurred hard currency spending would be delayed, but not stopped, in order to reduce foreign currency outlays.