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Suez SA (EPA:SEV) is about to trade ex-dividend in the next 2 days. You can purchase shares before the 18th of May in...
(Bloomberg) -- Egypt kept interest rates unchanged as authorities guard against an emerging markets sell-off and focus on bridging a financing gap spurred by the coronavirus pandemic.The central bank maintained the deposit rate at 9.25% and its lending rate at 10.25% for the second straight month, it said Thursday in a statement. Eleven of 14 economists surveyed by Bloomberg had predicted a hold after a record 300 basis points were slashed at a March 16 emergency meeting.While there was a slowdown in economic activity in March and April, “the diversity of the economy provides some cushion given the resilience of some sectors,” the bank said. Holding rates is consistent with its inflation goal of 9%, plus or minus 3 percentage points, by the fourth quarter and medium-term price stability, it said.The North African nation is now looking for ways to cover a financing shortfall estimated at about $10 billion in 2020 by EFG Hermes and Goldman Sachs Group Inc., as some of its main foreign-currency sources -- tourism, remittances and Suez Canal receipts -- take a hit from Covid-19.A favorite for carry-trade investors, Egypt saw its biggest-ever capital outflows of about $17 billion in the past two months. And with annual inflation accelerating in April for the first time in 2020, it risks losing the higher-rate buffer that had fueled its investment appeal.The country, which completed a three-year International Monetary Fund program in 2019, this week received $2.8 billion under the lender’s emergency financing instrument. It’s now seeking more than $5 billion from the fund via a stand-by arrangement, as well as $4 billion from other institutions, an official told Bloomberg.Read more: Egypt Seeking $9 Billion More From IMF and Other InstitutionsNet international reserves, at an all-time high before the outbreak, have declined by almost a fifth to $37 billion in the past two months. The central bank partially covered the pullback of overseas portfolio capital through its repatriation mechanism, which guarantees investors can withdraw profits in hard currency.The MPC “closely monitors all economic developments and will not hesitate to utilize all available tools to support the recovery of economic activity, within its price stability mandate,” according to the statement.(Updates with comments from central bank’s statement starting in third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Egypt expects to secure final approval to borrow $2.7 billion from the International Monetary Fund via a rapid financing facility next week, an official said, one of many African nations turning to the Washington-based lender as the coronavirus hits economies.Authorities last month requested fresh assistance from the IMF under both a stand-by agreement and the so-called Rapid Financing Instrument, saying it was needed to shield the Middle East’s fastest-growing economy from the fallout of the pandemic.A group of IMF staff is “in discussions with the authorities and expects to present the RFI request to the board on May 11,” said the IMF Mission Chief for Egypt Uma Ramakrishnan, without giving an estimate for the expected funding.The stand-by agreement is a preemptive step that will last one year and be coupled with a sovereign bond issuance program to fend off any future gaps in Egypt’s current account, said the official, who gave the RFI figure and asked not to be identified because the matter is confidential.No figure was given for the stand-by deal with the Washington-based institution.The IMF has already agreed a total of $10.4 billion in emergency coronavirus funding across the continent in recent weeks, from Nigeria -- Africa’s biggest economy -- to Kenya, Tunisia and Mozambique.Egypt last year wrapped up a sweeping IMF-backed reform program which included a $12 billion loan and sought to rekindle investor interest after the 2011 uprising that ousted then President Hosni Mubarak.The virus outbreak is putting pressure on some of Egypt’s main sources of foreign currency such as tourism, remittances and Suez Canal receipts. The country needs to bridge a funding gap of around $10 billion by end of 2020, according to estimates from investment banks EFG Hermes and Goldman Sachs Group Inc.Egypt’s net international reserves fell by a record $5.4 billion in March, as the central bank partially covered the pullback of overseas portfolio capital through its foreign-exchange repatriation mechanism, which guarantees investors can withdraw profits in hard currency. The reserves are now $40.1 billion, enough for about eight months of imports.The North African country, which has offered one of the world’s most profitable carry trades for investors in debt, saw $13.5 billion outflows in March, when foreign holdings in local securities shrank almost by half.Egypt “is right to utilize cheap IMF financing when it is available and when it comes with few or no conditions,” said Charles Robertson, the global chief economist at Renaissance Capital Ltd. “We think Egypt remains a good investment for bond funds globally and they will be reassured further by IMF involvement.”The RFI will allow Egypt to “address any immediate balance of payments needs and support the most affected sectors and vulnerable groups of people,” the IMF said in a statement after the request last month.(Update with chart and analyst comment in penultimate paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- As it tries to mitigate the economic fallout from the coronavirus pandemic, Egypt’s government has begun to plan for a recovery. Prime Minister Mostafa Madbouly recently participated in a symposium on “opportunities and priorities” in a post-pandemic era. More significant, the government is also pursuing new financing from the International Monetary Fund.While the last IMF bailout and the economic reforms that followed helped stabilize Egypt’s finances and secure access to private-sector borrowing, it failed to address many of the structural problems that prevented a sustainable economic recovery. The pandemic has increased the urgency of a new round of reforms, focusing on inclusivity, resilience and sustainability.Since 2016, Egypt’s has received positive international headlines as its GDP growth steadily rose by over 5% annually—it was on track to grow 5.7% this year, before the pandemic hit. But this growth was far from inclusive: millions of Egyptians have grown poorer, with the poverty rate rising from 27.8% in 2015 to 32.5% in 2018. The private sector, outside of oil and gas, has contracted nearly every month since the bailout, due in large part to weak consumer demand.Much of the government’s debt-driven stimulus, particularly in infrastructure and housing, has been channeled through security-sector enterprises, with no-bid contracts. Companies affiliated with the security sector have taken advantage of their privileges—such as exclusion from the regulations, taxes and customs applied to private businesses—to expand at the expense of private-sector actors. These anti-competitive practices have further depressed private-sector activity; investors are often reluctant to compete with privileged entities.The reform agenda’s failure to deliver inclusive growth has led, in turn, to an economy lacking in resilience. Growth has been insulated to a handful of sectors, most of which are vulnerable to external shocks: tourism, remittances, foreign direct investment in hydrocarbons and Suez Canal revenue, all of which are expected to decline because of the pandemic and the steep fall in oil prices. And then there’s Egypt’s dependence on fickle short-term carry-traders who have exited its debt markets in a dramatic fashion.With most of Egypt’s growth sectors and hard-currency sources in retreat, the unsustainable nature of the economy the government has sought to build is coming into sharp relief. There may be a temptation by the government to double down on its dependence on the military as an economic actor as the private sector appears even weaker than before, but this will only repeat the mistakes that brought Egypt to this point.In 2016 the IMF claimed it would deliver a more inclusive economy with greater private sector participation, attracting investments and an expansion social welfare programs. Reality fell well short of expectations and these mistakes should not be repeated.Madbouly is right to look for opportunities to redirect Egypt’s economic trajectory, but he should be prepared for a re-ordering of priorities, starting with a commitment to building an inclusive economy.He should start with social spending to reduce poverty and raise household spending power. The existing Takaful and Karama social programs are a positive start, but they only cover around a third of Egyptians living below the poverty line. Every Egyptian in need should have access to assistance.It is reassuring that the government plans to increase spending on education and healthcare, which have been underfunded for ages. But it is essential that the increases are real and substantial, rather than an exercise reclassification of line items in the health and education budgets to inflate their size. What is needed is a realignment of spending priorities toward investing in Egypt’s human capital.As part of the drive for more inclusive growth, all government contracts should go through a competitive tender process, and participating companies must pledge to use registered employees and ensure companies they subcontract do the same. This will help combat the problem of a huge informal workforce. The government cannot overcome its excessive dependence on debt without expanding the formal economy and the country’s tax base.In 2016, the government, with the encouragement of the IMF, opted to increase tax revenues by implementing a VAT regime, the easiest way to quickly increase revenue ahead of the massive borrowing being planned. The new levy, however, added to already elevated levels of inflation and disproportionately hurt the working and middle classes.Expanding tax base through a progressive tax regime is essential. Moreover, security-sector companies should be subject to the same taxes as private sector companies, not only to raise revenues but also in the interest of fair competition. This same fairness should be extended to all regulatory and customs regimes.Increased social spending and investment in human capital, coupled with opening space for the private sector, will help build an economy that is better positioned to create jobs and deliver sustainable, diversified growth. More capital going to taxable businesses will help the government address its woefully inadequate tax to GDP ratio and help reduce its dependence on international assistance and emergency financing.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Timothy Kaldas is an independent risk adviser and nonresident fellow at the Tahrir Institute for Middle East Policy. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Crude supplies from OPEC’s Middle East exporters, excluding Iran, soared in April to their highest level since at least January 2017. The surge came as Saudi Arabia and the United Arab Emirates abandoned restraint and boosted production after OPEC and its allies failed to agree on deepening output cuts in early March.Saudi Arabia, Iraq, Kuwait and the U.A.E., which together account for about 70% of the Organization of Petroleum Exporting Countries’ entire production, together shipped an average of 18.9 million barrels a day of crude and condensate last month, tanker-tracking data compiled by Bloomberg show. That was an increase of 2 million barrels a day from revised March levels.Saudi shipments in April rose by 1.95 million barrels a day, or 26%, from their March level, averaging 9.36 million. That was the most the kingdom has ever exported on a monthly average basis and was prompted by the collapse of the OPEC+ alliance, which failed to secure Russia’s participation in deeper curbs. Flows from the country’s Yanbu terminal on its Red Sea coast rose by about 36% to 1.53 million barrels a day, with shipments continuing to go into storage tanks on Egypt’s Mediterranean coast.Exports from the U.A.E. also rose in April, as the country followed Saudi Arabia in boosting production. Shipments exceeded 3.5 million barrels a day of crude and condensate, an increase of 250,000 barrels a day, or 8%, from March.The region’s other two producers were not able to boost exports. Iraq’s shipments fell month on month by 170,000 barrels a day, to their lowest level in three months, as crude sales to India plunged. Exports fell from both the country’s southern Basra Oil Terminal and the northern export route through Ceyhan in Turkey.Flows from Kuwait also edged lower month-on-month, dropping by 28,000 barrels a day, or 1%, from the daily average level seen in March. A jump in sales to China, which were up by 146,000 barrels a day, was more than offset by lower shipments to India, Japan and South Korea.Observed flows from Iran have been excluded, as tankers leaving the country often only appear in tracking data several weeks later, once they have reached choke-points like the Strait of Malacca or the Suez Canal, making early assessments of flows from the country less reliable. Signals from six tankers carrying an estimated 10 million barrels of Iranian crude or condensate appeared during April. The time and position at which the ships appeared suggest that most of them departed Iran in March.With nearly 43 million barrels of oil on ships from OPEC’s Middle East exporters yet to signal a final destination, estimates of flows to individual countries are subject to revision.Aggregate Persian Gulf crude flows to India, the closest major market, edged lower in April. Aggressive pricing by Saudi Arabia saw it boost flows by 46% to their highest level since at least the beginning of 2017, while shipments from Iraq were squeezed to their lowest in almost two years. India’s oil refiners are taking advantage of cheap Saudi crude to bulk up stockpiles even as the nation’s onshore storage tanks fill to the brim.Flows to the U.S. remained elevated in April, with initial vessel destination data indicating a combined flow of over 1 million barrels a day from Saudi Arabia and the first shipment from the U.A.E. since August 2018. Those flows could change, though, if steps are taken by the U.S. administration to discourage imports of Saudi crude. A voyage time of about six weeks to both the East and West Coasts of the U.S. means that actual flows often don’t become apparent for several weeks after loading.Observed shipments from Persian Gulf OPEC countries, excluding Iran, to China soared in April, rising to an unprecedented 4.76 million barrels a day, as shipments from Saudi Arabia and Iraq both surged to their highest levels since Bloomberg began tracking the flows in detail at the beginning of 2017.China, the first country to impose lockdowns to combat the Covid-19 pandemic, is also the first to begin to emerge from the restrictions. A combination of the recovery in economic activity and the availability of cheap crude for storage has spurred Chinese buying. Huge cuts to official selling prices of Persian Gulf OPEC crude grades for April saw Saudi Arabia cut its Arab Light and Arab Medium grades to their lowest ever levels against the regional benchmark Oman/Dubai average. That helped to keep flows competitive.Shipments from the region to Japan appear to have slumped in April after edging up in March. Flows to Japan from all four Persian Gulf OPEC countries were down month on month, bringing total shipments from the region to their lowest level in almost two years. JXTG plans to shut the sole crude distillation unit at its Oita refinery in western Japan from mid-May to early-July for regular maintenance, the time when April-loading cargoes from the Persian Gulf would begin to arrive.Flows to South Korea, the other big Asian buyer of Persian Gulf crude, rose by 200,000 barrels a day, or 13%, in April, reaching their highest level in five months. The biggest increase in both volume and percentage terms came from Iraq, where shipments increased by 242,000 barrels a day, or 130%. The surge comes even as South Korea runs out of onland storage space that can be leased to third-party companies.Note: The figures above include exports from northern Iraq via Ceyhan in Turkey and outflows from the U.A.E.’s Indian Ocean coast and from Saudi Arabian Red Sea ports. They include crude and condensates, a light form of oil extracted from gas fields. Figures for flows to individual destinations are subject to change, especially when ships pass transit points like Singapore and the Suez Canal.Bloomberg Terminal users can click on NI TANTRA for all tanker tracking stories, ALLX CUAG for tickerized data for Persian Gulf OPEC flows, and LINE GBLCRUDE for an overview of Bloomberg tanker tracking.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Unfortunately for some shareholders, the Suez (EPA:SEV) share price has dived 35% in the last thirty days. Even longer...
(Bloomberg Opinion) -- As Saudi Arabia and Russia engage in a war on oil prices, their mutual friend Egypt could fall victim to the fallout. The timing could hardly be worse for an economy already threatened by the global novel-coronavirus epidemic. As always, poor governance is likely to make a bad situation worse.Remittances, estimated by the World Bank to be worth $26.4 billion last year, make up roughly 10% of Egypt’s GDP. This vital source of hard currency comes mostly from Egyptians working in countries dependent on oil exports. A collapse in prices could lead to layoffs, placing downward pressure on remittances reaching Egypt’s banks.The coronavirus crisis is already affecting Egyptian expatriate workers returning to the Arabian Gulf from home visits. New restrictions require them to be tested for the virus in Egypt before they can go back to work. Huge crowds have assembled outside laboratories run by the health ministry, overwhelming the supply of test kits.The restrictions will likely grow more stringent as authorities in the Gulf states respond to reports of an outbreak on a Nile cruise ship.Even before the oil war, two other important pillars of Egypt’s economic growth—tourism and natural-gas exports—were wobbling from the impact of the virus crisis. With people everywhere canceling their travel plans for fear of contagion, the tourism sector was already bracing itself for a hit. Hossam Al Shaer, the head of Egypt’s chamber of tourism companies, says new bookings are down 70%-80% compared to the same period last year. The sector brought in over $12.5 billion last year, just under 5% of GDP.The epidemic has also reduced global demand for energy, a relatively new problem for Egypt, which has only recently become a significant exporter of natural gas. While oil prices have received the most attention, natural-gas prices have also dropped precipitously, accelerating a trend that began last November. While natural gas exports are relatively small valued at $1.2 billion in 2019, the sector has been an important draw for investors and increased production has allowed the government to save billions in hard currency that used to be devoted to imports.Yet another of the consequences of the epidemic, a slowing of global trade, will impact Egypt’s hard-currency earnings from tolls at the Suez Canal, further constricting the country’s access to dollars and adding to its current-account deficit.The final pillar of Egypt’s economic growth has been construction. Much of the growth in this sector has been due to debt-driven stimulus that the government has largely channeled through military-owned enterprises. These companies are contracted to undertake large infrastructure projects, ranging from expanding transportation links to building new cities like the new administrative capital on the outskirts of Cairo.To date, Egypt has been able to sell its debt to fixed-income investors quite easily, as it has been one of the best carry trades in the world. Large inflows have helped buoy the Egyptian pound against the dollar, adding handsomely to the returns investors have received over the already generous interest paid on Egyptian treasuries. But recent debt auctions failed to meet their sales targets, with only half the six-month treasury bills on offer sold as investors demanded higher interest rates.While Egypt has managed to stabilize and shrink its debt-to-GDP ratio, borrowing in the first half of the 2019-2020 fiscal year rose 12%. The central bank governor, Tarek Amer, recently boasted Egypt no longer needs lending from the International Monetary Fund since it can access funds from the private sector, but this may soon change. The combined effect of the epidemic and the oil war could increase the risk associated with lending to Egypt, adding to doubts that the country has the revenue to support growing levels of borrowing without support from multilateral agencies.Without such support, international investors in Egyptian capital markets may look to shrink their exposure in Egyptian debt. They will likely demand higher interest rates as the currency’s excellent performance over the past year is unlikely to be sustained. Government officials may believe Egypt is too big to fail, and that international assistance will be forthcoming if needed, however the generosity of international financial institutions may be limited as they seek to manage a global economic crisis.While no economy is impervious to the virus, Egypt’s vulnerability is accentuated by the government’s failure to support growth in the private sector, which has shrunk nearly every month since the IMF bailout in 2016. Depressed levels of consumption, already a drag on the private sector, are likely to be exacerbated by the crisis. As the military’s economic empire has expanded, thanks to unfair competitive advantages, private-sector competitors have been squeezed.It is an all-too-familiar Egyptian saga: Poor governance and rentier economic policies exacerbate economic challenges and leave the country highly vulnerable to external shocks. The twist in the tale this time is that Egypt's feuding friends are making matters worse.To contact the author of this story: Timothy Kaldas at KaldasTimothy@gmail.comTo contact the editor responsible for this story: Bobby Ghosh at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Timothy Kaldas is an independent risk adviser and nonresident fellow at the Tahrir Institute for Middle East Policy. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
One of the best investments we can make is in our own knowledge and skill set. With that in mind, this article will...
When Suez SA (ENXTPA:SEV) released its most recent earnings update (30 June 2019), I compared it against two factor...
European stock markets dived almost 3% to log their worst day since last December on Wednesday as the threat of a transatlantic trade war and dismal economic data added to fears about a faltering global economy. Losses in London were the most dramatic, with the FTSE 100 seeing its worst session in 3-1/2 years after Prime Minister Boris Johnson unveiled a final Brexit proposal that dimmed the chances of Britain leaving the European Union with a deal. In Europe, Airbus dropped 2% and the benchmark STOXX 600 index gave up almost all of the past month's gains after the World Trade Organization approved U.S. moves to slap import tariffs on $7.5 billion worth of European goods.