THE WEEKLY INTERNATIONAL MONETARY FUND LOAN TO EGYPT IS UNDERWAY

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1 THE WEEKLY Thursday Issue # 29 INTERNATIONAL MONETARY FUND LOAN TO EGYPT IS UNDERWAY Egypt s Cabinet declared in a statement, on the 26 th of July, that it is in final stages of agreeing on a 3-year loan of USD12 billion with the International Monetary Fund (IMF) at an interest rate of 1% to 1.5%. Negotiations, which have been ongoing for the past three months, could be finalized during IMF s mission visit to Egypt, scheduled on the 30 th of July. The statement confirmed that Egypt is seeking to finance a total funding gap of USD21 billion over 3 years through USD12 billion from IMF, while the other USD9 billion will be secured from bilateral deals and international institutions, including USD3 billion from the World Bank and USD1.5 billion from the African Development Bank. The Egyptian authorities have asked the IMF to provide financial support for their economic program. We welcome this request, and look forward to discussing policies which can help Egypt meet its economic challenges. Our goals are to help Egypt return to economic stability and to support strong, sustainable and job-rich growth Masood Ahmed Director of the Middle East and Central Asia Department, IMF Youm 7 27 th July 2016 We should ensure balance between the IMF demands and the social welfare needs, also there is an urgency to control government spending and energy consumption, encourage local production, prevent unnecessary imports, and stabilize food prices Prisedent Abdel Fattah Al-sisi Al-Ahram Gate 27 th July 2016 There is a need to cooperate with the IMF through the support program to enhance international confidence in the economy and attract foreign investment, and therefore achieve monetary and financial stability Sherif Ismail Prime Minister Reuters 26 th July 2016 IN THIS ISSUE... IPO Preparatory Procedures Accelerate EGP Stabilizes At Last CBE Auction New Discount On Suez Canal Transit Tolls Further Increase In Electricity Prices Parliament Approves New Civil Service Law A Financing Agreement To Support SMEs A WORLD OF REAL POSSIBILITIES 1

2 IPO PREPARATORY PROCEDURES ACCELERATE The government has started preliminary steps for implementing the Initial Public Offering (IPO) program previously announced last March. The program includes selling stakes of state owned companies in the banking and petroleum sectors through the Egypt Exchange (EGX). For this end, a new supervising committee formed by the Minister of Finance, Amr El-Garhy, Minister of Investment, Dalia Khorshid, and the Central Bank Deputy Governor, Lobna Helal. In addition, the government hired NI Capital company, a subsidiary of the National Investment Bank, as the IPO s advisor. The company, along with selected investment banks, are tasked with managing IPOs and setting a timetable for the program according to market conditions. The IPOs program is a part of Egypt s plan to diversify its investment sources and push growth rates forward by attracting indirect local and foreign investments estimated at USD10 billion over the next three years. The priority is given to successful companies, while losing companies will be restructured first Ashraf Ghazaly CEO of NI Capital Daily News Egypt 24 th July 2016 Unexpectedly, the Central Bank of Egypt (CBE) fixed the EGP value versus the USD at EGP8.78 during its weekly FX auction held on the 26 th of July. The move comes amid strong projections of EGP devaluation which pushed the USD up to exceed EGP13 in the parallel market prior the CBE auction. USD exchange rate against the EGP retreated by about 8% on the back of the mentioned decision along with the government announcement that it is seeking to secure USD12 billion from the IMF over three years. The Suez Canal Authority (SCA) has applied a 45% reduction from the applicable Suez Canal transit tolls excluding other services dues. The discount offered for the Very Large Crude Carriers (VLCCs), over 200,000 deadweight coming from the Gulf of Mexico, the Caribbean and the North Coast of South America to the Middle East. The reduction takes effect as of 24/7/2016 for an experimental period to be renewed Suez Canal Authority Circular No. 4/2016 Official Website July 2016 Electricity prices will be raised on residential use based on consumption brackets, according to the government s plan to reduce subsidies gradually during five years based on the reform program announced in July Prices increase will be slight on the first three segments of consumption and will then steadily increase for higher consumption segments, noting that this increase will be applied immediately in July. The new civil service law was approved by the Parliament and referred it to the State Council for constitutional and legislative revision before actual implementation. The Parliament approved two long-debated articles, which regulate annual incentives for employees and the appointment of temporary and seasonal employees. The law will regulate the performance of around 6.3 million employees in state departments and public authorities, aiming at fighting corruption and bureaucracy in government circles and reforming the country s administrative system Ashraf El Araby Minister of Planning Ahram Online 25 th July

3 Minister of International Cooperation, Sahar Nasr, signed a financing agreement, on the 25 th of July, with the Director General of the OPEC Fund for International Development (OFID), Soliman Harbish, and Managing Director of the Social Fund for Development (SFD), Soha Soliman. The agreement, worth a total of USD40 million, will be directed to support financing SMEs in areas most in need in Egypt s governorates. The project mainly aims to improve economic and social circumstances of poor families through financing micro and small enterprises with a focus on disadvantaged groups, including women with low income, small farmers, fishermen, and small entrepreneurs. It targets providing about 23,000 job opportunities Sahar Nasr Minister of International Cooperation Official Website 25 th July 2016 BP and Eni, two leading global integrated oil and gas companies, estimated the reserves of Baltim gas field, discovered on the 9 th of June, at 700 billion cubic feet of extractable gas. The first well, Baltim SW 1, has been drilled and reached a depth of 4,000 metres including 25 metres of water. The two companies target drilling additional six wells during FY2016/17, as part of Baltim South development lease in the East Nile Delta, and linking them to production on the National Gas Grid in H

4 EGYPT AT GLANCE EXCHANGE RATES USD EURO Sterling Pound % * Average Buy & Sell Prices For ALEXBANK W/W M/M Y/Y YTD 0% 13% 13.5% % -0.1% 13.3% 15.3% % -0.5% -3.8% 1.3% Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 EGP per USD EGP per Euro EGP per Pound Sterling STOCK MARKET W/W M/M Y/Y YTD EGX 30 8, % 15.8% 0.9% 13.2% EGX Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 EGX 30 EGX 70 (Rel.) EGX 100 (Rel.) 8, ,815 6,473 TB S AUCTION INTEREST RATES Auction Date 24 July July July July 2016 Maturity Average Yield % 91 Days Days Days Days Current* Previous** Overnight Deposit Rate 11.75% 10.75% Overnight Lending Rate 12.75% 11.75% Corridor Rate * at June 2016 ** at March % 11.25% FX-AUCTION RATES Auction Date 26 th July th July 2016 US $

5 Al Nuba, Egypt T : E : research@alexbank.com Head of Research Research Manager Senior Associate: Research: Emil Eskander Hemat El Masry Sahar Ezz El Arab Mariam Massoud Nahla Abdel Azim emil.eskander@alexbank.com hemat.elmasry@alexbank.com sahar.ezzelarab@alexbank.com mariam.massoud@alexbank.com nahla.abdelazim@alexbank.com Copyright Notice. The Weekly is a publication of ALEXBANK. No part of this publication may be reproduced or duplicated without the prior consent of ALEXBANK.This publication constitutes a summary of published news, quotes and economic indicators. This material does not constitute analytical economic research nor should be treated as such. All charts and graphs are from publicly available sources or proprietary data. Any views expressed in this publication do not necessarily reflect the opinion of ALEXBANK. The news, views and quotes within this publication are gathered from sources deemed to be reliable but which have not been independently verified. ALEXBANK does not make any guarantee to the accuracy or reliability of such information. AlexBank shall not be liable for any losses or damages incurred or suffered as a result of using its publications in part or in their entirety. 5