Ismail: No full float, but devaluation is coming.
Plus: IMF official isn’t afraid of runaway inflation in Egypt.

It’s day four for our first-ever reader poll, and your responses really do continue to amaze and delight us — particularly your kind words, excellent suggestions and trenchant criticism.

If you haven’t yet had time to answer the survey, tap here whenever you have a moment. You don’t need to answer all of the questions, and even if you do, it won’t take you more than a minute. If you would like feedback on your comment, please make sure to include your email address. We’re going poke around our storage area and see if we can’t find a few more mugs so we can offer 20 readers who complete all nine questions a set of Enterprise mugs. The survey closes at 1pm CLT on Sunday, 23 October. We’ll have our take on your answers to the economy questions the next morning.

We weren’t aware this was a “thing” except in the minds of maybe 2.5 journalists, but still: There will be no cabinet shuffle anytime soon, Prime Minister Sherif Ismail stressed yesterday at a meeting with journalists and intellectuals at which economic reforms and the subsidy system were the topics of the day. We have a rundown in Speed Round, below.

We’re not the only ones desperately waiting for the executive regulations of the value-added tax to come out. The situation now sees professional services firms (and, yes, morning tipsheets) withholding invoices until there’s clarity.

Donald Trump and Hillary Clinton clashed for the third and final time last night. Trump pledged to keep the nation “in suspense” over whether he would accept the election outcome if he lost. Clinton called her opponent is a Russian puppet. (Trump’s comeback, before he regained his footing: “No puppet, no puppet. You’re the puppet.” It’s presidential politics as kindergarten squabble.) And Fox News’ Chris Wallace did an amazing job keeping the two of them on track — and trying to keep the debate focused on policy rather than personal attacks. The New York Times has a solid wrap-up if you can’t bear to watch another of these things. Politico’s coverage was thin (and rough) at dispatch time, but will improve as the morning wears on.

Need to watch for yourself? CNN International will rebroadcast the debate at 8am CLT (6am GMT) according to their updated schedule for Thursday morning. Or tap here to watch on Youtube. If the link doesn’t automatically take you there, scrub forward to 29:35 for the start of the festivities.

Charter airlines file to fly Russia-Egypt route: We’re trying not to read too much into this, but a report from Russian news agency TASS takes rather extensive note of the multiple Russia-Egypt routes that four charters have applied to operate. Perhaps more significantly: The charter interest was disclosed in a statement from Russia’s Federal Air Transport Agency. The story, picked up by the reliable site RBTH, notes that two other airlines had applied in September.

The Electricity Ministry will sign offtake agreements with eight solar power firms under the first phase of FiT projects between today and next Thursday, as the deadline for financial closure is on Friday 26 October, Al Borsa reports. The companies have been given 10 days to reach financial close. Electricity Minister Mohamed Shaker met with representatives from five of the eight renewable energy companies (FAS, Wadi Degla, Alf, WEnergy and Infinity) to discuss closing power purchase agreement signing and procedures for financial closure, Al Borsa reported. We have new developments on funding for phase two in the Speed Round.

Qualified FiT phase one companies have another extension on their deadline to decide whether they’re staying with phase one, moving to phase two or withdrawing. Tomorrow’s deadline has been extended to Thursday, 27 October. H/t Donia El-M.

The iPhone 7 goes on sale in Egypt today, according to the company’s Egyptian website. The sticker price is every bit as ugly as we feared: Tradeline (which sent out a message yesterday evening saying it would have the phones available from 11pm last night) has the iPhone 7 at EGP 12,999 to EGP 16,999 depending on your choice of storage, while the dual-camera iPhone 7 Plus is running EGP 15,799 to EGP 19,799. For comparison: The 128 GB iPhone 7 Plus is c. 57% more expensive than was iPhone 6s Plus with the same storage back in March. (In other Apple news, the Cupertino-based company announced yesterday event for Thursday, 27 October at which analysts expect it to announce new Macs. MacRumors and Ars have more, and you’ll be able to watch the event stream here.)

Not an inveterate iSheep like many of us here? We’ve also stuffed reviews of Google’s Pixel phone in our Pocket account to read with coffee over the weekend. It’s just received great reviews from Walt Mossberg and Dieter Bohn, two of the best gadget guys out there. The Verge’s video review is also worth a gander (watch, run time: 6:46).

We can avoid mention no longer: Michael Bolton will be performing in Cairo on Friday. Ticket information is here. Just please don’t admit to friends you’re going.

The European Bank for Reconstruction and Development issued a statement yesterday headlined “EBRD stresses commitment to support Egypt’s economy,” noting that a delegation from the bank will visit Egypt 24-27 October to “explore new opportunities” with government officials and members of the business community “to intensify its activities” here. “The EBRD will continue to be supportive of the government’s efforts to re-energise the economy through small and large projects, including engagement in projects in the Suez Canal Zone Project which has a high economic growth potential coupled with potential strong private sector engagement,” the statement quoted EBRD Egypt Director Philip ter Woort as saying.

There will be no full float of the EGP, but there will be a more flexible exchange rate, said Prime Minister Sherif Ismail at a meeting with writers and journalists yesterday, according to columnist Abdullah El Sennawy, who was in attendance. Ismail reiterated that devaluation was the Central Bank’s call — and said the current parallel market price does not reflect the true value of the EGP. This the second time in as many days that the PM has hinted at devaluation. Ismail has, generally speaking, been largely content until now to let his ministers carry the water on devaluation and economic reform, making his comments in the past two days all the more significant, in our view.

Talks with the IMF are wrapping up and the government is merely working on the fine-print, Ismail told reporters from MBC Masr in comments that aired on the political talk show Yahduth Fi Masr (runtime: 49:24; Ismail’s comments only appear during the first six minutes of the episode).

Ismail also telegraphed yesterday that the government is building stocks of strategic staples ahead of devaluation: The CBE has allocated USD 1.8 bn for the buildup up of a six-month reserve of strategic supplies, the PM said. Supply Minister Mohamed Ali El Sheikh later jumped on the topic, confirming the size of the buy to Reuters and saying the drive is being coordinated with the Armed Forces. The government also tried to reassure the public the ongoing shortage of sugar will end in the coming two weeks: The state plans to flood the market, said Assistant Supply Minister Ahmed Kamal (watch, runtime: 8:34).

Cabinet is debating how to replace the current commodity subsidy system with a direct cash payout to qualified beneficiaries, Ismail said at the meeting, according to AMAY. The move would be implemented gradually, he added. Industry is backing the move: Mohamed Saad El Din, head of the LPG Investors Association said that the move would kill inefficiency and leakage from the fuel subsidy system. Supply handouts inevitably create a parallel market, he said, and too often benefit those who have no need of the subsidy in the first place, Al Mal reports. Supply Minister Mohamed Ali El Sheikh also jumped on board the subsidies efficiency train, saying that the ministry was focused on weeding out those who are not in need of them. He did announce, however, that the ministry plans to increase subsidies in the supply smart card system from a current EGP 18 per month.

House to probe subsidies: The House of Representatives is planning to hold to seven sessions to debate subsidy reform, Al Shorouk reports.

Finally: The government is considering listing the notorious “private funds” in the official budget, according to Al-Mal. The funds — which are not part of the budget and which were formed with the intention of weaning some government bodies off the Finance Ministry — have gained the reputation for being slush funds and havens for corruption.

As our temporary (?) resurrection of Last Night’s Talk Shows this week suggests, the Ismail cabinet and other officials have launched a media blitz in the past week to start getting the public on board with reforms— and to show the IMF we’re moving in the right direction.

Ismail government announces cuts to state spending, mum on subsidies: The Ismail cabinet’s economic group is recommending the government slash non-salary spending by government bodies by as much as 15-20%, according to a cabinet statement picked up by Youm7. The cuts wouldn’t apply to salaries or spending on projects. Bureaucrats can forget about that new oak desk and fountain pen. The economic group is also pushing to downsize Egypt’s diplomatic missions abroad by as much as 50%. The economic group also decided yesterday to:

• Approve the USD 900 mn phosphate manufacturing complex in Wadi El Gedid which will be developed by China State Construction Engineering Company;
• Allocate EGP 900 mn towards completing the Egyptian Museum;
• Allocate EGP 200 mn towards housing development in Luxor;
• Approve completing the feasibility study for an electric railway project connecting the new capital with 10th of Ramadan city.

The IMF has lowered its 2017 consumer price inflation forecast for Egypt to 17.3%, according to its October 2016 Middle East and Central Asia Regional Economic Outlook report (pdf), revising downward the projected 18.2% rate in the October 2016 World Economic Outlook, which came out earlier this month. Now for the bad news: The IMF now projects consumer prices will rise 14% this year, up from 10.2% in its World Economic Outlook report. Egypt will see the most inflationary conditions in the region next year, the institution says, skewing the regional average to 9.8%. The region, and Egypt in particular, will face additional upward pressure from rising global energy prices, further electricity and water subsidy phase-outs, and increased domestic demand from increased large-scale public and private investment, the UMF says.

The IMF maintained Egypt’s projected growth outlook of 3.8% this year and 4.0% for next year. While the report criticized the slowness with which we’re cutting subsidies at a time when energy prices are expected to rise, the report takes a positive view on Egypt’s move towards fiscal reform through reforming the tax code and implementing the VAT. The IMF also noted that it is committing USD 20 bn to MENA oil importing countries to support these reforms, and guess which country made the list?

Also yesterday: A senior IMF official downplayed the risk of runaway inflation post-devaluation, suggesting the current parallel-market value of the USD is already priced-in. “If you look at what’s happening to prices today, already many prices are reflecting the parallel market rate,” Massood Ahmed, head of the IMF’s Middle East and Central Asia department, told Bloomberg. “It’s not obvious to me there is going to be a big additional impact on prices.” Ahmed, who is due to retire this month, “said he hopes the IMF’s Executive Board would be able to consider the loan request later this month or in November. He said there was ‘no deadline’ for Egypt to implement the reforms. ‘But the more important point is that delays on important areas they’re trying to address, such as the problem they have in the foreign-exchange market, would have a high cost on the economy,’ he said. As part of the initial loan agreement, Egyptian officials also agreed to move to a flexible exchange-rate system.”

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International lenders want guarantees and more clarity on arbitration for FiT phase two: International funding institutions, including International Finance Corporation and the European Bank for Reconstruction and Development, want financial guarantees from the Finance Ministry for phase two of the feed-in tariff (FiT) program and a draft for the arbitration clause in the agreements before deciding on participating, unnamed sources told Al Mal. The ministry’s reply is that text will be ready for review “within the next few days.” Frankly, we have to go with the funders on this one: convoluted arbitration conditions for phase two (which are baffling even for lawyers) place arbitration under Egyptian law, while allowing procedural nullity to take place outside the country. EBRD Director for Egypt Philip ter Woort had stated on Monday that the any decision by the EBRD to fund phase two projects would also be predicated on number of participating companies and their financial needs.

The New Investment Law will grant tax exemptions on projects whose capital investments exceed EGP 150 mn and whose workforce exceeds 250 employees, an unnamed source tells Al Mal. special breaks will be given to projects in certain regions including Upper Egypt and Sinai, and for specific projects deemed essential to regional development. A key feature of the legislation as well appears to be enforcing time schedules on approving permits and licenses on the government. This was done undoubtedly to address some of the issues of the failed one-stop shop policy which will remain in place under the law. Government employees and agencies will be held accountable if procedures are delayed, said the source.

The law will also supersede the guidelines of other government bodies, a move meant to cut regulatory entanglements and red tape. It also provides certain protections to investors from prosecution and land seizures. As we still do not have the copy of the law at hand, we cannot accurately dissect it or confirm the source’s statement. But we can say that these promises in some form or the other were made before. The draft was reportedly sent to business associations for their opinions.

Getting lost keeping up with changes to credit card limits? Al Mal have published a series of charts outlining all the recent changes, including NBE, HSBC, CIB, Banque Misr, Banque du Caire, Barclays, ABC Bank, the Arab African International Bank, Alexbank, and the Qatar National Bank.

Not in that table: Ahli Bank of Kuwait – Egypt also announced new cuts to spending limits on its cards, Al Mal reports. The bank also raised the fee on purchases to 6% for debit cards, and up to 9% for credit cards. Also: Bank Audi has banned withdrawals on credit cards abroad and increased the fee on purchases to 8%, Al Mal reports, and Banque du Caire will now reportedly demand you hand over travel documents before allowing you to use a debit card abroad, something the bank’s CEO Mohamed El Etreby announced on Monday.

Orascom Construction added USD 575 mn to its backlog in the US during 3Q2016 through wholly-owned units Contrack Watts and Weitz, OC said in a statement. The work secured was a combination of new infrastructure work, mainly in the Pacific Rim, and commercial business in Weitz’s core markets across the US.

The EGP strengthened slightly yesterday, with greenbacks changing hands at EGP 15.25-15.50 to the USD, according to Al Mal, from Tuesday’s rate of EGP 15.55 and EGP 15.50 per USD reported by Al Shorouk and Reuters respectively.

4G service should hit the market early next year, ICT Minister Yasser El Kadi told talk show host Amr Adib on Kol Youm last night (watch, run time 1:03). Etisalat, Vodafone, Orange, and Telecom Egypt have all recently signed 4G license agreements, as we noted previously.

Private sector silos will be used in storing wheat during the 2017 wheat harvest collection season, said the Supply Minister. These, however, will be under specific guidelines, said the minister who did not announce what they were. The government’s current storage capacity stands at 750K tonnes, with 1.5 mn tonnes of capacity expected to be added once the UAE-funded silos become operational. The ministry does intend on using Blumberg Grain’s 105 shounas, which the minister states has a capacity of 320K tonnes, AMAY reports. This contradicts reports that the joint agriculture-supply committee setting up regulations for the harvest season have sidelined the private sector.

On the issue of wheat imports, Swiss inspection firm SGS said yesterday it has not spoken with Egypt on inspecting wheat cargos, Reuters reports The news comes contrary to an announcement by Agriculture Minister Essam Fayed in September about SGS replacing government experts as part of an overhaul of the import system. An SGS spokesperson told Reuters: “I think it is a case of miscommunication.”

Egypt ranks last in region on rule of law? The United Arab Emirates is ranked number one and Egypt last in the MENA region on “how the rule of law is experienced by the general public worldwide.” The annual ranking by the World Justice Project will be released here today, but the Jordan Times have an advance copy, noting that the UAE is ranked number one, Jordan second and Egypt last in the region. Afghanistan, Cambodia and Venezuela account for the bottom three globally, the newspaper says.

Birell steps in it with ad that prompts backlash from pro-Army quarters: Birell, the malt beverage brand of Heineken-owned beer maker Al-Ahram Beverages, stepped on a landmine yesterday with an advert declaring “everyone’s dream — indescribable happiness” atop a form applying for an exemption from military service.” The ad, since pulled, lives still on Twitter, where it prompted the expected nationalist backlash. Al-Ahram Beverages has posted an apology on its Facebook page saying the ad was posted without the approval of senior staff.

Saudi Arabia sets emerging-markets record with debut global bond: The kingdom raised USD 17.5 bn, eclipsing the USD 16.5 bn record set by Argentina earlier this year. Citi, HSBC and JPMorgan led the transaction, with assistance from Bank of China, BNP Paribas, Deutsche Bank, Goldman Sachs, Morgan Stanley, Mitsubishi UFJ, and NCB Capital. The Financial Times, Bloomberg and Reuters have more, depending on your reading preference.

Other national and international stories worth noting this morning:

• Mind-altering substances are “easier to get in Egypt now than to find your preferred choice of cigarette,” Ahram Online quotes a shopkeeper as saying in its look at the state of the cigarette market in Egypt.
• Egypt has a bit part to play in “Tramadol: The Opioid Crisis for the Rest of the World” from the Wall Street Journal (paywall), an outstanding piece of journalism that gets to the root of why Tramadol is so thoroughly abused around the world: A quirk in the global regulatory system has left physicians afraid that if it were designated as restricted, the global poor would lose access to the only painkiller still available to them.
• Forget about booking an Airbnb in NYC if New York State Governor Andrew Cuomo signs a bill that would slap a USD 7,750 fine on anyone found to have advertised a vacancy on the service. The Financial Times (paywall) and Quartz have more, as does the New York Times.

We end a very busy news week with a lull on the international front this morning. Among the more noteworthy pieces out there today:

“How Eni Bet Big and Won Big on Natural Gas off Egypt”: The New York Times’ Stanley Reed dives deep into Eni to tell the story of how the Italian oil giant “reignited the [oil] industry’s flagging interest in Egypt and the entire eastern Mediterranean region.” Reed is a veteran oil and gas reporter with a strong interest in geopolitics whose decades covering the industry show in an exceptionally readable story that nevertheless provides never-before-told details on how the discovery was made by the team on the ground in Egypt.

Veteran financial writer Patrick Werr speaks for us here at Enterprise this morning when he writes in his weekly column: “Is it not time to pry the sugar industry out of the sclerotic hands of the government and turn it over to the country’s more agile private traders and manufacturers?” Werr’s explainer for the National on the origins of the current sugar crisis is a must-read if you’re getting up to speed on the topic.

The Washington Post’s Sudarsan Raghavan and Heba Mahfouz get in on popular discontentment with economic conditions in Egypt with “As Egypt’s economy struggles, calls for protests against Sissi grow louder.”

Finally, theNew York Times has a solid look at governments’ addiction to petroleum subsidies in which Egypt plays merely a walk-on role, but which is nevertheless great reading. As we’ve been grumbling for some time: “Economists say the vast majority of benefits from the subsidies go to the wealthy, not to the poor, because it is the wealthy who do the most driving and use the most electricity.”

Al Shorouk columnist Abdullah El Senawy says you cannot bet on a future in a country with ancient rules. What he characterizes as “panic” about protests next month (which are yet to be backed by any heavy-hitting group, he notes) reveals the looming threat of civil unrest caused by the economic challenges the masses face today.

An initiative to see retailers and manufacturers slash the price of key goods and services by 20% for three months is likely to fail, writes Youm7’s Hafez Abou Saada. Prices have spiralled out of control. The government has proven unable redress the situation, which he calls “excruciating.” The culprits: Government officials who do little more than “act as the president’s secretaries.”

The Al Masry Al Youm columnist writing under the pseudonym Newton lashes out against reports that a 14-year-old girl was banned from school by her teacher for not wearing a headscarf.

The most expensive nature documentary series ever made is back for a second season: Ten years after the monumental Planet Earth series, which cost GBP 20 mn and five years to make, BBC has announced Planet Earth II. Equipped with the latest cameras, technology, Planet Earth II promises to be an “extraordinary experience…[and] uncovers stories about the natural world we have simply never been able to witness before,” producer Charlotte Moore told London tabloid The Sun. Sir David Attenborough reprises his role as narrator. Scroll to the end of the page for the one-minute teaser.

The International Cooperation Ministry is in talks with Islamic Development Bank for a credit facility to import petroleum products, minister Sahar Nasr told Al Borsa. The ministry has reached a similar agreement (still in place) with the bank before, she added without revealing the value of the agreement. The talks come as Egypt scrambles for petroleum supplies after the Aramco shipment for October for petroleum products did not arrive.

A Singaporean delegation headed by President Tony Tan will visit Egypt at the end of this month to discuss investments in infrastructure, utilities, energy and housing, Ahram Gate reports. The delegation will include three ministers, 16 investors, and a number of MPs from Singapore’s parliament. The delegation is scheduled to visit the Suez Canal Economic Zone.

The Arab Contractors are set to complete the Rod El Farag axis by mid-2017 at a total cost of EGP 5 bn, Chairman Mohsen Salah told Amwal Al Ghad. The axis stretches 10.5 km from Rod El Farag to the Cairo-Alexandria Desert Road, intersecting with the North entrance to Sheikh Zayed.

The House of Representatives’ health committee will study a draft bill launching a Cabinet-affiliated Egyptian Drug Authority tasked with regulating the market, Al Mal reported. The Authority would take on most responsibilities of the Central Administration of Pharmaceutical Affairs, Pharmacists Syndicate head Mohy Ebeid said. The bill would still require a vote by the house as a whole should it pass committee.

Real Estate developers Tabarak Holding have begun construction on their EGP 450 mn Capital East project, Chairman Ali El Sherbani told Al Borsa. The project includes 500 apartments and is located in Nasr City.

Marriott will roll-out a 344-room under the banner of its “ecofriendly” Element Hotels brand in Abraj Misr’s The Gate in 2019, Marriott said in a statement released yesterday. "Egypt is one of our key markets and we are excited to introduce a new brand to the capital’s city center," said Alex Kyriakidis, the hotel operator’s Middle East and Africa boss. Amwal Al Ghad has details on the appointment of the contractor and the planned 2017 tender for electromechanical and finishing works.

The three major shipping lines have asked the Suez Canal Authority to do better than the 3% it’s offering them in return for their pre-paying as much as USD 4 bn as a three-year advance on transit fees. The advances would be deposited at the Central Bank of Egypt, unnamed sources tell Al Mal, which say the discount could go up to 8%, but the SCA’s counter-offer includes larger advances for larger discounts. The SCA has offered no official comment on the story.

Hyundai Verna was the top-selling passenger car in Egypt during the seven months of 2016 through to July, Al Borsa reports citing an AMIC report. 8092 Hyundai Verna vehicles were sold in the first seven months of 2016, a 9.6% share of the market’s sales volumes. Sales revenues amounted to EGP 817 mn.

El Sewedy Electric announced it is buying 1.4 mn shares as treasury stocks at a price of EGP 62.5 each. The buyback offer closes Tuesday 25 October, according to a regulatory filing. The company completed the purchase of 3.6 mn shares at the same price this week “to utilize excess cash in local currency.”

The Housing and Development Bank tapped Beltone-Acumen to manage a EGP 500 mn real estate fund that the bank will establish, Beltone-Acumen’s chairman Hani Tawfik told Al Borsa.

The Eastern Company signed export agreements with Kuwait, Iraq and Libya, chairman Mohamed Othman Haroun told Al Borsa. The hope presumably is that these new export contracts would offset the impact the USD shortage is having on the company, which led to its failure to abide by long-term import contracts with African countries. Also: Eastern claims it is owed c. USD 32 mn by Philip Morris for July, August and September, as Eastern Company stopped accepting EGP for cigarettes it produces for the company, Haroun said, Al Mal reported.

The Finance Ministry will hold meetings with accountant to discuss procedures to implement the Tax Disputes Settlement Act passed as a law in September, before the procedures are issued as a ministerial decree, an unnamed source told Al Borsa.

Egypt’s Court of Cassation has accepted the appeals of 14 defendants filed last year against death sentences imposed by a lower criminal court, Reuters reported. Eight more defendants in the case were sentenced to death in absentia. Egyptian law affords automatic retrials to convictions in absentia. The 23 defendants face charges of murder in the killing of a security official at the police station and the attempted murder of others in July 2013, as well as assault, rioting, sabotage, and illegal possession of firearms and knives. In February, the same court ordered the retrial of 149 people out of a total 183 on death row in a similar case on the same police station in August 2013 that left 14 policemen dead.

Egypt has requested that Russia supply Ka-52 helicopters for Mistral helicopter carriers, Anatoly Punchuk, deputy director of the Russian Federal Service for Military-Technical Cooperation (FSMTC), told Sputnik. "The customer is considering the possibility of forming several helicopter squadrons. The exact amount will be agreed in the course of further negotiations," Punchuk said. We had earlier reported Egypt signed an accord with Russia in September to supply the choppers and train Egyptian pilots.

Egypt was placed in Group D at the African Cup of Nations 2017 draw, with Ghana, Mali, and Uganda, Al Mal reports.

President Abdel Fattah El Sisi visited the American University in Cairo yesterday to meet with its Board of Trustees as well as the university’s president, former ambassador to Egypt Francis J. Ricciardone, Al Masry Al Youm reports. Enhancing collaboration between the privately-owned university, state institutions, and public universities were among the topics on the agenda.