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Egypt Government Sees Flexible Exchange Rate as Good for Economy – BNN Bloomberg

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(Bloomberg) —

Egypt’s government now favors a more flexible currency to support an economy that’s come under pressure from Russia’s invasion of Ukraine, a top official said.

Authorities already allowed the pound, which had been kept stable against the dollar for about two years, to weaken sharply in March, but investors and economists think it has much further to go to reflect its true value. Egypt’s currency is down more than 18% so far this year.

Investors are bracing for a second wave of depreciation while the government is in talks for a new loan from the International Monetary Fund, which favors a more flexible exchange rate. Asked on Tuesday about calls for a deeper devaluation, Hala Elsaid, Egypt’s planning minister, signaled openness to looser management of the currency.

“We as a government do agree that a flexible exchange rate is definitely good for the economy,” Elsaid, who’s also chairwoman of Egypt’s sovereign wealth fund, told Bloomberg Television in an interview.

The Arab world’s most populous nation is racing to buttress the economy after the war in Ukraine sent Egypt’s food and fuel import bills soaring and helped spur an exodus of foreign portfolio investors from the local debt market. 

It’s a reversal of fortune for the one-time darling of emerging markets. Drawn to Egypt’s high interest rates, a stable pound and its track record of market-friendly moves, foreigners had pumped billions of dollars into its debt market.

A leadership shakeup at the central bank last month only served to spur speculation about the currency outlook after the replacement of Tarek Amer, who’d been governor for about seven years and was seen as supportive of a stable pound.

‘Large and Ambitious’

“A large and ambitious IMF program is needed,” Bank of America Corp. economist Jean-Michel Saliba said in a report published on Tuesday. “We assume Egypt shifts to a flexible FX regime within an IMF program.”

BofA estimates Egypt’s gross external funding needs for the full year of 2023 at $58 billion, or about 14% of gross domestic product, and said it assumes the government can secure a $15 billion extended fund facility program from the IMF for three years. 

“Large external funding needs call for flexible dollar/pound,” Saliba said. “A flexible dollar/pound is key to help the current-account deficit compress over the coming period.”

Finance Minister Mohamed Maait has previously said that Egypt is asking for “definitely” less than $15 billion.

Elsaid said “the government is working very hard to increase our foreign exchange receipts” by means of an effort to boost exports, foreign direct investment and remittances from abroad.

Help has also come in the form of more than $22 billion in deposits and investment pledges from its energy-rich Persian Gulf allies.

Abu Dhabi wealth fund ADQ and a unit of Saudi Arabia’s Public Investment Fund have so far pumped roughly $3 billion into the country, snapping up government-held stakes in prominent companies in deals facilitated by the Egyptian sovereign fund.

More such agreements are expected, possibly including the landmark sale of stakes in some firms held by Egypt’s army. The government is also promising new policies on state ownership, limiting its involvement in some areas and exiting others, as it seeks large-scale investment from private enterprise.

Elsaid said Egypt has set up a “pre-IPO” fund, with the aim of holding public stakes and working with strategic investors ahead of public offerings.

Egypt will revisit its forecasts for the economy by next month to account for shocks from abroad, she said. The country has recently benefited from improvements in FDI and exports, according to Elsaid.

(Updates with economist comments starting in eighth paragraph)

©2022 Bloomberg L.P.

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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