Egypt: Meet five new officials paving the way for an IMF deal

By Ahmed Farid, Sherif Tarek
Posted on Monday, 26 September 2022 15:37, updated on Tuesday, 27 September 2022 11:09

The International Monetary Fund (IMF) headquarters building in Washington, U.S., April 8, 2019. REUTERS/Yuri Gripas

Egypt has been introducing a new batch of measures to break a deadlock with the IMF as both sides have - since March - been in drawn-out talks over a new agreement, which Finance Minister Mohamed Maait recently said could be concluded in a month or two.

The North African nation has far exceeded its IMF lending quota, having received $20bn in loans from the global lender since 2016. Thus, the coming facility, whose value and details are yet to be revealed, seems to be more demanding, especially with the Russo-Ukrainian war fueling mounting economic pressures.

We highlight five key officials who were all installed last August – seemingly with a mandate to pave the way for the dollar-hungry Egypt to secure a new IMF deal – and the changes they have brought about thus far.

Hassan Abdalla, central bank governor

A veteran banker who was close to Mubarak’s younger son, Hassan Abdalla joined the Arab African International Bank (AAIB) in 1982, where he became vice chairman and managing director from 2002 to 2018.

A former chairman of the Union de Banques Arabes et Françaises (UBAF) in Hong Kong, Abdalla founded the financial advisory and private equity firm Panther Associates in 2019. He also chaired Egypt’s United Media Services from 2021 until he was appointed the Central Bank of Egypt’s (CBE) governor in August.

He took over at the CBE after the resignation of his predecessor Tarek Amer, whose monetary policies weren’t in line with the IMF’s requirements. To reverse the trend, ensuring a more flexible exchange rate regime and leading a less aggressive tightening cycle are apparently at the forefront of Abdalla’s agenda.

The CBE has devalued the Egyptian pound by over 24% since March to absorb the war-induced liquidity shock, even as the market anticipates further depreciation, a prerequisite for the new IMF deal.

The conundrum is whether the coming devaluation will take place as a one-off adjustment – similar to that of November 2016 – or gradually, as a good number of economists expect it to be. So far, under Abdalla, the pound has shed around 2%, reaching nearly 19.50 against the US dollar. It is widely expected to go over 20 and keep sliding afterwards.

Meanwhile, the central bank’s Monetary Policy Committee (MPC) has kept interest rates unchanged in both meetings held under Abdalla’s command, following cumulative 300 bps rate hikes during Amer’s stint since March. To tame Egypt’s nearly four-year high inflation, last Thursday, the MPC opted to raise the reserve ratios for banks, an unusual tightening tool that, unlike rate hikes, doesn’t lead to higher borrowing costs.

Abdalla, who holds regular meetings with the government, has an overarching target of improving Egypt’s business environment, which has been dented by import restrictions – imposed under Amer – to indirectly control the exchange rate.

After Abdalla took office, the CBE began to ease these restrictions, allowing companies to use the foreign currency held in their local bank accounts to process import operations. More of such measures are expected to be implemented soon.

Hisham Ezz Al-Arab, adviser to CBE Governor

Hisham Ezz Al-Arab, another renowned banker in Egypt, was appointed as adviser to the CBE governor.

Ezz Al-Arab, one of the figures initially tipped to take up the governor role following Amer’s departure, led the Commercial International Bank (CIB) to become Egypt’s largest private lender in terms of revenue, profitability and net worth, during his tenure as chairman from 2002 to 2020.

He also served as managing director at J.P. Morgan and Deutsche Bank from 1990 to 1997 and from 1997 to 1999, respectively, then founded HE Advisory in February 2021, where he is still serving as managing partner.

Both Ezz Al-Arab and Abdalla were at loggerheads with Amer, who is widely believed to have been involved in ending their respective chairmanships of CIB and AAIB.

“There was obvious competition between them, and the market’s perception is that both Hisham and Hassan were sacked because of Tarek,” a source close to Ezz Al-Arab tells The Africa Report, on condition of anonymity.

How come the chairman was solely corrupt and none of the rest was incriminated?

“He was threatened by them as they were the candidates to replace him, and they often criticised his policies in private conversations that Tarek was aware of.

“Hisham Ezz Al-Arab parted ways with CIB because of alleged corrupt practices, but the rest of the top management retained their positions. How come the chairman was solely corrupt and none of the rest was incriminated? The consensus is that Ezz Al-Arab was targeted by Amer.”

Mohamed Naguib, former non-executive chairman of Société Arabe Internationale de Banque (SAIB), was also named an adviser to the CBE governor. He previously chaired Misr Bank-Europe (MBE) in Germany and was vice chairman as well as head of the credit and investment committee at Banque Misr.

Rami El-Dokany, EGX chairman

Dokany filled the vacancy as chair of the Egyptian Exchange (EGX) in August after his predecessor, Mohamed Farid, took up the role of head of the Financial Regulatory Authority (FRA). He has nearly two decades of experience in investment, corporate finance, and strategic planning, and was named the secretary general of the Arab Federation of Capital Markets (AFCM) in 2019.

From May 2017 to August 2022, Dokany chaired two companies: The fintech-focused venture capital firm Pride Capital, which he co-founded, and fintech startup Inclusion that he founded to offer e-payment services to small and medium enterprises. He has also been a part-time consultant at the World Bank Group since November 2015.

On his vision to revitalise the EGX, which has long been struggling amid consecutive global shocks, Dokany said – in a press conference – that he will be aiming to pump more liquidity into the market by scaling up the trading volume. In addition to increasing retail investors, he will be looking to encourage government companies to expand their listings, whether through secondary offerings or IPOs.

The government IPO programme, which aims to list shares in over 20 state-run companies, has been running at a slow pace, with the targeted offerings recurrently postponed over the past three years. So far, only two government IPOs have materialised: A 4.5% stake in tobacco producer Eastern Company in 2019, and a 26.1% stake in fintech firm e-finance in October 2021. Moreover, an additional 10% stake was floated by the already-listed Abu Qir Fertilisers in December 2021.

The IMF has been urging the state to make way for the private sector to be more entrenched in the economy, a step that is hoped to boost growth rates and alleviate financing pressures off the Egyptian government’s shoulders.

Egypt announced several months ago that it will be looking to sell $40bn worth of state assets in the coming four years, to enable the private sector to play a greater role in the economy. President Abdel Fattah al-Sisi has also called for the listing of stakes in army-owned companies, none of which has ever been traded on EGX.

Mohamed Farid, FRA chairman

Shortly after Farid took over, the FRA implemented key regulations aiming to facilitate EGX listing procedures and encourage investment in the stock market.

As per the new rules, companies will be able to temporarily list their shares on the EXG for a compliance period of six months before obtaining the FRA’s approval, giving firms more time to finalise listing procedures.

The regulator has also removed the cap on the number of shares a company can offer to be bought on margin, previously set at 30% of the company’s free float, or 15% of its total shares. The cap on the shares that can be bought on margin by a single investor, previously set at 5% of a company’s free float or 3% of its total shares, has also been revoked.

Farid headed the EGX for five years, and was also the chairman of the Federation of Euro-Asian Stock Exchanges (FEAS) for two tenures: One from August 2017 to October 2018 and another from June 2021 to August 2022.

From August 2017 to August 2022, he chaired EGID, a joint venture between the EGX and NASDAQ that acts as an information hub providing investors with data on EGX-listed companies. He also worked as an external consultant to the World Bank from 2013 to 2016.

Mahmoud Kamal Esmat, public enterprise sector minister

A cabinet reshuffle brought a dozen new ministers, including Esmat, who is to be involved in the preparation for public enterprise sector companies to be put up for sale.

Egypt seeks to raise up to $6bn before mid-2023 by selling stakes in state-owned businesses, either through public offerings or block sales to strategic investors, Planning Minister Hala El-Said, who’s also the chairperson of the Egyptian sovereign wealth fund, told Bloomberg on Sunday.

Esmat is also expected to continue the liquidation of public-sector companies plunging in the red, as Egypt has been looking since 2018 to restructure loss-making public business sector companies to minimise fiscal risk and maintain financial stability, which the IMF highly advocates.

Reminiscent to the fate of the Egyptian Iron and Steel Company (Hadisolb) under his predecessor, Hesham Tawfik, the 62-year-old state-run El-Nasr Company for Coke and Chemicals was given the green light to be liquidated in September right after Esmat’s appointment, with the government citing huge losses and environmental concerns.

Esmat was chairman of two state-run firms: Cairo Airport Company (CAC) from 2013 to 2014 and Egyptian Holding Company for Airports and Air Navigation (EHAAN) from 2014 to 2015. His latest role, before joining the cabinet, was that of chairman of Cairo Glass Manufacturing Co. (CGC).

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options