Anonymous minister says IMF talks are on; CBE says, “Not yet, they aren’t.”

The House of Representatives will vote on the government’s budget proposal on Wednesday, Planning and Budgeting subcommittee member Hesham Abdel Wahed told Al Borsa.

Egypt will open the Rafah border crossing in both directions for five days starting Wednesday, Anadolu reported. “We have been informed by the Egyptian side that they will open the crossing for five days from Wednesday to Monday, except on Friday,” Gaza’s border authority said in a statement.

Thursday is a national holiday commemorating 30 June. Enterprise will also be off, but we’ll be back on Sunday.

Eid Al Fitr should begin next Wednesday (6 July), at least according to the National Research Institute of Astronomy and Geophysics. There’s no word from the government on official days off as yet, but the odds look good we’ll have two long weekends in a row — or a chance for a monumental bridge.

Next hearing in Tiran, Sanafir case on 3 July: The Supreme Administrative Court will hold on Sunday, 3 July, its next hearing on the State Lawsuits Authority’s appeal of a lower court ruling declaring the islands of Sanafir and Tiran to be Egyptian.

Egypt is in talks with the IMF to borrow USD 5 bn, anonymous minister says: Egypt has begun negotiations with the International Monetary Fund to borrow USD 5 bn, a “minister in Egypt’s economic group” told Reuters’ Arabic service on condition of anonymity. Talks began last week and a delegation from the IMF is expected to visit Egypt to complete the negotiations next month. No information was provided on what kind of loan Egypt is seeking. The newswire also provided coverage in English.

In response, Central Bank of Egypt Governor Tarek Amer issued a statement denying Egypt is “asking for assistance” from the IMF, adding that the government has its “own economic reform programme.” Amer added that if Egypt seeks IMF funding, it is entitled to a much larger amount than the rumoured USD 5 bn, securing about USD 10 bn if it chose to do so, according to Reuters. The IMF has also denied the news. “We have not received any program and financing request,” IMF Mission Chief for Egypt Chris Jarvis told Reuters.
“The size of any financial arrangement would depend on Egypt’s financing needs and on the strength of its economic programme,” he added.

The value-added tax (VAT) is expected to come into effect by September of this year if the measure passes muster in the House of Representatives on schedule, Finance Minister Amr El Garhy said, Reuters’ Arabic service reported on Monday. He added that the government is expected to receive returns of around EGP 20-25 bn following the implementation of the tax. As we noted earlier this month, the fate of tuition at international schools is among the unresolved questions about the VAT.

The flight data recorder of crashed EgyptAir flight MS804 has been repaired, Egyptian investigators said in a statement on Monday, putting them one step closer to explaining the cause of the crash, Reuters reports. Investigators added that work on the cockpit voice recorder would begin “within hours.” Earlier on Monday, the Paris prosecutor’s office opened a manslaughter investigation into the crash, ruling out terrorism as a possible cause at this stage, the prosecutor’s office told Reuters. The plane’s black box memory chips were sent to France for repair. Debris from the aircraft was brought to Cairo airport on Monday, “where investigators will try to reassemble part of the plane’s frame in search of additional clues that may help explain the crash,” a source on the investigation committee said.

EGX doing damage control after Brexit: The EGX issued a report containing financial information for all the companies traded on the bourse to give a “clear and objective” picture of the “real” position of the companies in the aftermath of Brexit. Bourse Chairman Mohamed Omran insists investors need to know the “truth.” He says the market remains healthy, especially as 73% of all traded companies on the EGX are trading at lower than 10x P/E and 7% between 10x-15x. The complete data can be viewed here.

Still, international funds will be more reluctant to inject funds into emerging markets, head of reserves management at the CBE Rami Aboul Naga told Al Ahram. Aboul Naga insists Brexit will not impact the CBE’s monetary policy, even though there might be some impact on equity markets. He says the CBE continues to adopt a very conservative management strategy with its reserves, focusing more on investing in government bonds and diversifying its currency sources, shielding against market fluctuations.

British investments aren’t going anywhere: The UK’s interest and strategy in Egypt did not change following the Brexit vote, British Ambassador John Casson told reporters. European Union funding to Egypt this year will not be impacted as budgetary appropriations for them have already been made, Al Shorouk quoted Casson as saying. The USD 25 bn in UK investments in Egypt will not be impacted either as they are independent from joint EU policy. If anything, the Egyptian British Chamber of Commerce (EBCC) believes exiting the EU will result in more British investments being channelled to Egypt, EBCC secretary general Taher El Sherif told Daily News Egypt.

Beltone Financial’s general assembly approved the conversion of some of its shares to global depository receipts, capping the GDP program at 23% of its share capital and EGP 1 bn, Al Borsa reported on Monday. It also approved an EGP 1 bn increase in authorized capital to EGP 3 bn and an EGP 1 bn increase in its issued and paid-in capital.

Auerbach Grayson acquisition on track: In other company news, Beltone is only waiting on regulatory approval to purchase a 51% stake in New York-based firm Auerbach Grayson, El Torgoman told Al Borsa on Monday, adding that they have not faced any hurdles so far in the process.

Meanwhile, Beltone Chairman Sameh El Torgoman called on the company’s shareholders to join the court case the company has filed against the EGX and EFSA and their respective chairmen. El Torgoman said the repeated cancellation of trades on Beltone’s shares are harming the company directly and the market generally, Al Mal reported. Yesterday we reported Beltone was suing the two agencies.

General Electric is investing more in Egypt, with a focus on development projects, GE CEO for North East Africa Ayman Khattab told Al Masry Al Youm. The company is allocating USD 1.4 bn towards technical training and equipment and is participating in the upgrading of some 27 hospitals, he added. International Cooperation Minister Sahar Nasr has requested that 25% of production inputs be domestically sourced in GE projects to strengthen domestic production. A GE delegation, including CEO Jeffrey Immelt, discussed new opportunities in Egypt with President Abdel Fattah El Sisi on 18 June.

The Finance Ministry will not change its budget allocations for borrowing in FY2016-17 despite the CBE’s move to hike increase interest rates 100 bps, a source told Al Borsa. The fiscal impact of higher rates will not appear in FY2016-17, but rather the following year, said the source, estimating the additional cost to be around EGP 4 bn and EGP 15-17 bn in FY2017-18. The source added that the ministry and the CBE are coordinating the issuance of treasuries to manage the impact of the interest rate increase.

Egypt could be looking to issue a USD 3 bn Eurobond at some point between September and October, Finance Minister Amr El Garhy said on Monday according to Reuters. “We are studying a bond issuance of USD 3 bn on the international market between September and October of this year in order to fill part of the budget’s financing gap, which is expected to reach USD 10 bn,” he said.

MOVES- Vodafone Egypt appointed Stefano Gastaut as CEO effective 1 September, Al Mal reported. Gastaut is currently CEO at Vodafone Partner Markets in London. He succeeds Ahmed Essam, who has been CEO of Vodafone Egypt since July 2014.

MOVES- The Central Bank of Egypt’s head of reserves management Rami Aboul Naga has been appointed as the CBE’s representative on the board of the Egyptian Exchange, Al Borsa reported on Monday.

MOVES- Mahmoud Galal El Haridy has been appointed as full-time member on Misr Insurance Holding Company’s board of directors, dealing mainly with information systems and operations management, while Khaled Mahmoud Abbas has been appointed a non-full-time member, Al Borsa reported on Monday.

Are free zones coming back to life? After being torpedoed by former Finance Minister Hani Dimian, free zones may be making a comeback as the Finance Ministry is apparently in talks with Investment Minister Dalia Khorshid, who is championing the measure, Al Borsa reports. Feasibility studies related to tax and customs start early next month Finance Minister Amr El Garhy has said, potentially paving the way for the return of 5-10-year tax holidays for qualifying businesses. Former finance minister Hani Dimian had opposed having private free zones, saying, “The investor does not care about the return of the private free zones so much as he cares about the investment climate in general, the elimination of bureaucracy, providing land and facilitating licensing procedures.” The Investment Ministry has been pushing for free zones and other investment incentives since the zones were scrapped in March 2015; GAFI CEO Alaa Omar warned last month that investors are looking relocate to Dubai’s Jebel Ali as Egypt was unable to offer acceptable incentives.

European Union applying pressure over import registry? European Union Delegation to Egypt chief James Moran is urging Trade and Industry Minister Tarek Kabil to scrap the import registry, Al Borsa reports. The measure was imposed in January to slow imports and ease demand for foreign exchange. Cautioning that the measures could have a “negative impact,” Moran said Egypt should work to grow exports rather than imposing restrictions on imports. “We hope the Egyptian Minister of Industry withdraws these measures in line with WTO rules,” Moran said. Egypt had explained it as a measure for quality control, but trade partners like the EU and Turkey were not convinced. Last week, Kabil had denied that any complaints had been lodged with the WTO over the measures.

High school students protest postponement of final exams, clash with police: A number of high school students protested in front of the Education Ministry in Cairo yesterday over the postponement of Thanawiya Amma exams following a widespread cheating scandal. The students called for the resignation of Education Minister Al-Hilali Al- Sherbini, with the protest making its way to the vicinity of Mohamed Mahmoud street near Tahrir Square, where it was broken up by the police using tear gas, Al Shorouk says. MPs have also called for the resignation of the minister after an urgent meeting of the House Education Committee on Monday, Ahram Online reports. The committee summoned El-Sheribini and Prime Minister Sherif Ismail to face questioning over the leakes — called for a reshuffle of Education Ministry officials responsible for the exams, Al Masry Al Youm says.

Liliane Daoud, a Lebanese host at Egyptian television network ONTV, was deported to Beirut on Monday after being detained at her home by immigration officials,Mada Masr reported early Tuesday morning, citing her lawyer Zyad Elelaimy. The news came hours after Daoud, whose show Al Soura Al Kamla had given voice to opposition political factions, announced on Twitter she was leaving her post with ONTV. Both her Facebook and Twitter accounts have been taken down. “[The officials] prevented her from making any calls and confiscated her mobile phone,” Elelaimy added. ONTV host Gaber Al Armooty along with his producer Mohamed El-Garhy also they’d be leaving the channel on Sunday, weeks after it was acquired by steel mogul Ahmed Abu Hashima’s Egyptian Media Company, according to Ahram Online. As part of the shakeup at the channel, the board was considering firing Al Armooty and Daoud, we reported in May.

ONTV later said Daoud departed on amicable terms, Al Borsa reports. The network also clarified Al Armooty would be leaving due to contractual issues, with politics bearing no influence on the decision. Youssef Alhosseiny will also be returning to host El Sada El Mohtaramoon following the Eid break.

In other news, Egyptian activist Mozn Hassan was stopped from flying to Beirut for a women’s rights conference on Monday when passport control officials told her she was banned from travel, according to Reuters. Hassan, who is the director of Nazra for Feminist Studies, was “barred from flying due to her alleged involvement in a high-profile case in which authorities have accused non-governmental organizations of receiving foreign funds with the aim of sowing chaos,” Nazra said in a statement. No comment has so far been made from prosecutors, who have imposed a gag order on the foreign funding case.

Israel and Turkey normalize relations: “The Leviathan field can supply gas needs for Egypt and also for Turkey and from there to Europe,” Israel’s Prime Minister Benjamin Netanyahu said yesterday during the signing of a reconciliation agreement with Turkey. Energy issues aside, Netanyahu said the agreement signed with Recep Erdogan “is an agreement of strategic importance for the State of Israel… The agreement allows humanitarian treatment for the Gaza strip subject to security arrangements and that’s in Israel’s interest. In addition, the agreement prevents Hamas terror activities, political and military, on Turkish soil and that includes collecting money.” The agreement ends a six-year rift between the two counties and includes returning to full diplomatic representation.

…Erdogan’s reconciliation tour did not stop there, as he sent a letter to Russian President Vladimir Putin apologising “for the death of the Russian pilot who was killed when a Russian jet was downed over the Syrian-Turkish border last November,” RT reported, quoting a Kremlin statement. Russia is “a friend and a strategic partner” and Turkey “never had a desire or a deliberate intention to down an aircraft belonging to Russia,” the letter reportedly said.

Lawyers opposed to the government decision to hand over Tiran and Sanafir to Saudi are claiming authorities are “meddling in court proceedings over the case,” writes Hamza Hendawi for the AP. The lawyers are citing a minister’s call for the court to issue a verdict on the case within a week, “along with what they described as the "unprecedented speed" with which a date was set for a hearing, just hours after the government’s appeal was filed.

What a massive cyberattack on New York City could look like based on past attacks: “Homeland Security recently estimated that one major cyberattack — the NSA chief has said it’s a matter of ‘when, not if’ — could cost USD 50 bn and cause 2,500 fatalities.” Reeves Wiedeman, a member of the New Yorker’s editorial team, pieces together what a massive, coordinated cyberattack could look like based on previous attacks and demonstrations of potential attacks: “In 2015, for an article in Wired, two hackers in St. Louis took control of a Jeep traveling 75 mph, sprayed wiper fluid so the driver couldn’t see, then cut the transmission.” (Read Envisioning the hack that could take down New York City)

We call this ‘one of the best’ commercials this Ramadan, as we quickly realized no one at working at Enterprise can tolerate watching Egyptian television long enough to have a complete picture of all the commercials released this season for us to be able to definitively state that something is or is not the best. We have, however, seen the more notable commercials this year: the mandatory 500 Egyptian celebrities per second Vodafone ad, the Juhayna ads of course — so we have a reasonable handle on what’s been put out there.

One of JWT Cairo’s ads for Hayat Alex Park compound this year strikes us as particularly noteworthy for praise. The commercial’s beleaguered protagonist, Dina, is taken out to a family iftar to help cheer her up after having received poor grades on her exams.

The sometimes stifling claustrophobia of Egyptian family life is on full display here, as one’s Egyptian family trying to cheer them up can often be the most excruciatingly painful (albeit well-intentioned) experiences one can go through in life. Dina’s mother casually threatening to marry her off to her slob of what we presume is her first cousin, to all the other incredibly “helpful” comments her family gives her, all serves to only amplify her anxieties about her future. Her attention drifts until their words blend in with the background music, whose lyrics may or may not be distorted by her thoughts of her future. (Watch in Arabic or Watch in Arabic with English subtitles, running time: 1:03)

In case there was any shred of hope left, David Cameron told the House of Commons that the UK’s decision to leave the EU was final, writes the FT. Sinking global risk appetite caused the GBP to sink to a new three-decade low against the USD with US and European equity markets still reeling from losses, according to the FT (paywall). Barclays and Royal Bank of Scotland Group had their shares halted as they plunged to lows not seen since the financial crisis.

Standard & Poor’s cut (paywall) the UK’s rating on Monday to AA from AAA, warning more cuts could be on the horizon, with Fitch Ratings also lowering its rating to AA with a negative outlook. Goldman Sachs, UBS, Deutsche Bank, and HSBC, City of London economists and a host of other financial houses are warning clients that the UK is “entering a period of slower growth and higher inflation,” according to the FT (paywall).

But Brexit is also causing global ripples. Bill Gross, manager of the Janus Global Unconstrained Bond Fund, says the vote has pushed the odds of a US recession to as high as 50%. “This is the end of globalization as we know it,” Gross said.

Oil Minister Tarek El Molla met with Australian Ambassador to Egypt Neil Hawkins to discuss cooperation on petroleum and mineral resources, Ahram reported. Hawkins said Australian companies are interested in expanding in the mineral resources sector and invited El Molla to attend the International Mining and Resources Conference held in Melbourne in November.

The House of Representatives approved a USD 20 mn grant from the Kuwait Fund for Arab Economic Development to finance educational projects for Syrian refugees in Egypt. SIS says “a joint committee of the education, scientific research and the Arab affairs committees recommended the establishment of a technical office in the education, foreign and international cooperation ministries to supervise the grant funds and to provide the committee with a report every three months in this regard.”

Investment Minister Dalia Khorshid is in talks with UAE officials about a joint investment fund between the two countries for long-term agricultural and industrial projects in Egypt, Al Shorouk reported.

The joint Egyptian-Israeli committee will meet next month in Tel Aviv to discuss the Qualifying Industrial Zones (QIZ) program, Industry and Trade Ministry sources told Amwal Al Ghad. The Egyptian officials are set to once again request a reduction of Israel’s 10.5% content component requirement on exports to the US under the program and an expansion of the agreement to cover six new zones, the sources said. Israel had already rejected the reduction in April, as Egyptian manufacturers have for years wanted to cut the component to 8.5%.

Egypt and the European Union are discussing a security and anti-terrorism agreement, European Union delegation in Egypt chief James Moran is quoted as having at the delegation’s annual iftar, Al Shorouk reported. “We are working with Egypt on the issue of peace in the Middle East, on Libya and the immigration challenge,” Moran said. On trade, the ambassador said Egyptian exports started recovering, suggesting Egyptian sales of agricultural products to the EU were up 10%.

Sierra Leone president Ernest Bai Koroma is in Cairo for talks on political and economic issues with Egyptian president Abdel-Fattah El-Sisi, Ittihadiya spokesman Alaa Youssef said, Al Masry Al Youm reported. The two focused on cooperation in health. mining and maritime resources as well as security talks.

The Oil Ministry is negotiating with international companies for 12 additional LNG shipments, Oil Minister Tarek El Molla told Al Borsa. The shipments will arrive at a rate of two per month starting July until the end of the year to meet domestic demand.

Arab companies have earmarked 49% of the EGP 2.5 bn in investments needed to build the Salhiya sugar factory in 2018, sources at the Food Industries Holding Company told Al Borsa. Egypt will hold the remaining 51% of the equity, with 17% to the Sugar and Integrated Industries Company and 36% to the private sector, the source added. The factory will produce beetroot sugar at a capacity of 250k tonnes annually, he said.

The Federation of Egyptian Industries and the House Industry Committee are in talks with Prime Minister Sherif Ismail and Trade and Industry Minister Tarek El Molla to reduce the natural gas prices for steel factories and later to all factories, he told Al Mal reported. We had noted earlier this month that the government decided not to apply the decision to reduce prices to USD 4.5 mmBtu from USD 7 mmBtu, saying producers did not meet conditions, including reducing steel prices and operating at full capacity. El Sewedy says the decision would help developing local industry, providing foreign currency and reducing production costs, hence increasing competitiveness for local products.

The Health Ministry has surveyed 75 out 400 Takamol hospitals that can be presented as investments to the private sector through partnerships or the establishment of a hospital management company, Al Mal reported. The average cost of upgrading one of the hospitals is estimated at a minimum of EGP 30 mn, Health Minister Ahmed Emad said. The Takamol hospitals are located in vital areas in 17 governorates, excluding Cairo and Giza.

Madaar Development is looking to invest EGP 4.5 bn into the domestic market in 2017, Chairman Gasser Bahgat told Al Borsa. The company recently launched its Azha project in Ain Al Sokhna at a total cost of EGP 7 bn and will commence developments on 48 feddans in Sheikh Zayed, as well as 160 feddans on the Cairo-Alexandria Desert Road, said Bahgat. Madaar is looking to join the second phase of public-private partnership projects issued by the Housing Ministry, he added.

French Ambassador to Egypt André Parant has requested direct flights between Paris and Sharm El Sheikh in a meeting with Tourism Minister Yehia Rashad, Amwal Al Ghad reported. Direct flights from Lyon and Marseille to Sharm El Sheikh are also being studied, said Coste. The Tourism Ministry is preparing a promotional campaign targeting French markets, said Rashad.

Telecom Egypt will receive a second tranche of withheld dividends from Vodafone Egypt of EGP 750 mn, a source from the CIT Ministry told Reuters. Vodafone Egypt has been withholding dividends since 2012 due to difficulties in repatriating profits, but in April it agreed to release EGP 3.34 bn in withheld dividends. Telecom Egypt, which owns 45% of Vodafone Egypt, was entitled to EGP 1.5 bn in dividends, payable over two installments in April and June.

The Egyptian Financial Supervisory Authority (EFSA) has approved liquidating a number of FinCorp Investment Holdings’ operations except for equity financial advisory, Al Mal reported. FinCorp’s EGM made the decision to scale the business down in November 2015. Chairman Salem Hamdy said the economic climate in Egypt has not been conducive to investment recently given the shortage of foreign currency and increasing bureaucracy.

Lebanese private equity firm Emerging Investment Partners (EIP) are setting up a regional direct investment fund with a capital of USD 100 mn, Managing Director Karim Burhani told Al Borsa. The fund is allocating 50% of its capital towards investments in Egypt, he added, noting that EIP is addressing a number of international lenders to discuss contributing to the fund. As we had reported earlier, EIP had acquired 100% of General Cable Egypt from US-based General Cable.

City Stars Mall reported a 9.4% y-o-y increase in revenue to USD 116.5 mn in 2015, Al Borsa reported. The mall made USD 96.5 mn in revenue from rent in 2015, up 9.6% y-o-y from 2014, but garage revenues fell 5% in the same period to USD 3.7 mn, said Golden Pyramids Plaza Project Manager Murad Nasri.

Some 17 agreements and MoUs signed with Saudi Arabia are unlikely to be impacted following an initial court ruling rejecting the handover of Tiran and Sanafir to Saudi Arabia, Al Mal reported. The paper has extensive coverage of various sectors, surveying expert and official opinions on the agreements and alternative solutions for worst-case scenarios should they fall through.

• Tax Authority sources say the prevention of dual taxation agreement signed between Egypt and Saudi Arabia will likely be unaffected.
• Oil Ministry officials say the agreement with Aramco to provide Egypt with petroleum products is binding and cannot be broken, while the SUMED–Aramco agreement to use Egyptian storage capacity for Saudi crude is still just an MoU and is not binding. If the agreement were to fall apart it would present no problem to Egypt, added the officials.
• An Electricity Ministry official believes electricity projects will be unaffected as most of them are already under execution. The Dairut project is in the negotiation phase with Saudi’s ACWA Power in the running, but will not be affected as Saudi has a large interest in the project, sources at the Egyptian Electricity Holding Company said.
• Head of the services and follow-up department at the Agriculture Ministry Ahmed Abou El Yazeid said agricultural projects are unlikely to be affected but projects can be issued to other investors, such as with the yet-to-materialize poultry farm projects, said General Organization for Veterinary Service Chief Ibrahim Mahrous.

Oil rebounding to USD 50 per bbl could cause a deficit in the FY2016-17 budget of EGP 12-15 bn seeing as the government is basing its projections on an average oil price of USD 40 per bbl, Finance Minister Amr El Garhy said, AMAY reported on Monday. Planning Minister Ashraf Al Araby confirmed as much last month in a statement on Egypt’s growth targets and metrics for the current and next fiscal year, with the Finance Ministry stating previously that a hike of USD 1 per bbl in the price of oil would lead to a EGP 1.1 bn spike in the budget deficit. El Garhy also added that Egyptian General Petroleum Corporation had suffered estimated losses of EGP 400 bn due to the oil price rebound.

A ministerial committee is set to work with local and international advisory bodies to conduct economic, financial, and administrative studies on Egypt’s proposed sovereign wealth fund Amlak, Al Borsa reported on Monday. EGP 5 bn has been already earmarked for the fund in FY2015/16’s budget. The fund will be state-owned through the National Investment Bank and will “encourage diversification and support sustainable economic and social development,” the cabinet said when it was first announced.

Minister of Finance Amr El Garhy has called on ministry employees to try to increase tax revenues by EGP 78 bn to reach EGP 500 bn in the coming financial year, in an effort to reduce the budget deficit, Al Mal reported on Monday.

Sudan released 26 Egyptian students detained pending investigations into the alleged leaking of high school exams, according to a Foreign Ministry statement on Monday. The minister has been in talks with Sudanese authorities on the issue since March.