Details of IMF facility out

The terms of the USD 12 bn IMF agreement are here, and not a moment too soon, as the local press came close to orchestrating a rain dance for it. It is not surprising that this what was driving the conversation today. The report on the agreement was released through an online presser by IMF Mission Chief for Egypt Chris Jarvis, where he gave a brief on the economic challenges and solutions identified by the report. These would be contingent on the government sticking to the reform agenda. Jarvis took questions on the economy, where he stated that the IMF expects inflation, which rose higher than projected in December, to begin falling in the second quarter of 2017. This will depend on the stabilizing of the exchange rate, which has started to happen, after the EGP depreciated beyond what was expected when the float was enacted. All in all, Jarvis believes that all is well and the government is doing what it’s supposed to. And if it continues, Egypt should receive the second tranche in late April, following a review of progress by an IMF team at the end of February. You can catch the full press conference here (watch; 28:53).

Economists are not so hopeful for this year at least: The government is set to miss its target for economic growth in FY2016-17, a Reuters poll of 14 economists showed. They expect the economy to grow by 3.9% this fiscal year, slow down to 3.5% in FY2017-18, but pick up in FY2018-19 to 4.0%. Analysts expect inflation to hit 13% in FY2016-17, higher than the previous forecast of 11%, and climb to 19.2% in FY2017-18. Price increases should ease from FY2018-19, when inflation rates are set to fall to 13.8%, according to the poll. "With overall business conditions severely depressed, inflation on the rise and an expected slowdown in consumption, we anticipate private sector activity to be constrained in the short term," said Nadene Johnson, economist at NKC. "Medium term growth prospects are slightly more upbeat due to an improvement in private sector activity, easing of inflationary pressures, acceleration in export growth and higher investment," Johnson added.

Also, 2016 was officially the Earth’s warmest since record-keeping began in the 1880s, the World Meteorological Organization announced. Egypt was one of the regions that had a “much warmer than average” year.

Goodbye Barry, hello Donald: Across the pond, as the United States braces itself for The Donald’s inauguration tomorrow, outgoing President Barack Obama used his last press conference to attempt to deliver a message of hope, but apparently could only muster enough optimism to say, “I think we’re going to be OK.” Predicting that he will refrain from giving Trump specific advice once he assumes the presidency, Obama said he is banking on “the intricate details of governing” slowing down “Trump’s bombastic [read: crazy] tendencies,” CNN reports.

There was conspicuously very little talk on the IMF agreement among the talking heads in one of the dullest nights for talk shows ever.
Kol Youm’s Amr Adib championed workers’ rights by calling on the private sector to raise staff salaries by 10-20%, because anything less could push the market over the edge and into a downward spiral. He spoke to Federation of Egyptian Industries member Ahmed Gaber, who took the opportunity to pat his own back and declare that he raised his staff salaries by 25% (watch, runtime 1:39).

Adib loudly urged his viewers to go out and support the Military Production Ministry by buying its newest creation: the Helwan 360 refrigerators (watch, runtime 7:22). Military Production Minister Mohamed El Assar phoned in to tell Adib that Egypt isn’t the only country in the world where military-owned factories make products for civilians (watch, runtime 6:44).

Al Hayah El Youm’s Tamer Amin focused on footballer Mohamed Aboutrika’s inclusion in a list of 1,500 alleged terrorists with connections to the Ikhwan. Amin, an ardent fan, wondered why it’s taking authorities more than two years to determine whether one of Egypt’s most important football players is guilty or innocent of the charges against him.Amin also praised the footballer’s quiet disposition and commended him for not publicly reacting to the news (watch, runtime 5:49).

Meanwhile, Yahduth Fi Masr’s Sherif Amer once again spent the entirety of last night’s episode listening to political commentator Mostafa El Fekki ramble on about education and national projects.

Lamees El Hadidy was off the air last night.

The long-awaited details of the USD 12 bn IMF agreement are here: The Fund released yesterday its staff report (pdf) on Egypt’s Extended Facility Fund (EFF), complete with details on the government’s reform commitments and the Fund’s appraisal of Egypt’s current situation and the path forward. Bloomberg’s Ahmed Feteha gives a neat breakdown of the key elements of the report.

The report sees Egypt as struggling with three main interlocked problems: Rising public debt, an “urgent” balance of payments problem, and persistently low growth and high unemployment rates. Egypt’s EFF carries “significant risks” because of difficulties that are inherent in implementing reform, such as revenue shortfalls and higher-than-expected wage increases, among others, as well as external shocks.

In the medium term, the program’s monetary policy will be focusing on reducing inflation caused by the policy reforms to mid-single digits, as well as scaling down “uncomfortably high” public debt. The Fund has projected that the government’s debt will drop from 95% of the GDP in FY2015-16 to 78% in FY2020-21. By the end of the program, the IMF staff sees overall fiscal deficit reduced to less than half of its FY2015-16 level. Real GDP growth for the current FY is expected to hover around 4%.

The CBE will maintain a flexible exchange rate regime and focus on shoring up reserves by operating mainly on the buy-side once, with gross reserves expected to reach USD 33 bn by FY2018-19, and climb further to reach north of USD 37 bn in FY2020-21. In the meantime, Egypt is expected to continue cracking down on the parallel market. The Fund believes that the banking sector will be able to keep up with the transition to the new exchange regimes. The government has also vowed to remove by June the USD 50K cap on cash deposits for the import of non-priority goods, as well as the USD 100K cap on transfers abroad.

Energy subsidies, we bid you adieu: Fuel subsidies will see “significant reductions,” with the government committed to eliminating electricity subsidies altogether over the next five years. The government will couple the subsidy cuts with a general overhaul of the energy sector to modernize it, and is expected to submit a medium-term strategy by March. Meanwhile, the restoration of EGPC’s financial sustainability will also be on the government’s to-do list.

That’s not to say that the government will leave its citizens out in the cold, as an additional 1% of GDP will be spent on food subsidies and cash transfers to the poor.

The government will also implement structural reforms to boost growth and reduce unemployment through legislation such as the Industry Permits Act, which will be ready by March and the Bankruptcy Act by June, facilitating access to finance for SMEs, developing an action plan to rationalize the export-promotion regime.

When and how will Egypt be repaying the IMF? The IMF notes that Egypt’s capacity to repay the EFF is “adequate, but there are significant risks.” The proposed schedule will see the Fund reviewing Egypt’s performance since the end of December 2016 and disbursing USD 1.25 bn on March 15, after which it will disburse USD 2 bn every six months until March 15, 2019.

Planning Minister Ashraf El Araby announced indicators and performance of key economic sectors during 1Q for the FY 2016-17 fiscal year, in a press conference following the cabinet meeting on Wednesday. Overall, economic growth for the quarter reached 3.4%, in line with the government’s target of 4% by FY 2016-17. Foreign direct investment grew to USD 1.9 bn, up from USD 1.3 bn in 1Q15-16. Imports fell to USD 13.9 bn for the quarter from USD 14.7 bn during the same period last year. The highest performing sectors include the ICT and construction sectors which grew 11.2% and 8.2% respectively, said El Araby. Tourism revenues fell 37.5%, Al Shorouk reports. Unemployment fell marginally to 12.6% from 12.8% during the same period in FY2015-16.

M&A Watch- Nestlé’s acquisition of Caravan Marketing Company, which we covered yesterday, will be completed within six weeks, a source told Al Mal. The source says Nestlé is buying 100% of Caravan’s shares for EGP 400-500 mn. Caravan’s Chairman Amr Barakat said company sales recorded nearly EGP 500 mn in 2016. He added that CI Capital advised Caravan on the sale with Baker & McKenzie providing legal advisory. PwC reportedly advised Nestlé.

Not a unicorn after all? Amazon and India’s Flipkart Online Services Pvt have walked away from talks to acquire Souq.com after disagreeing over price, sources told Bloomberg. Souq.com is now seeking other potential investors and is reportedly negotiating with Majid Al Futtaim. Souq.com had appointed Goldman Sachs to find buyers for a stake last year and last November, it was reported that Amazon was in talks to buy the company reportedly for a valuation of USD 1 bn.

The court ruling against Juhayna Food Industries Chairman Safwan Thabet concerns him personally, and does not impact companies where he is a shareholder, the company said in a statement yesterday. The EGX had temporarily halted trading on Juhayna’s stock and required clarification on the impact of the decision by the Cairo Criminal Court to place Thabet on a terror watchlist and freeze his personal assets. The court ruling was handed down in absentia and Thabet was not officially notified, the statement from Juhayna explained, and he will appeal the ruling before the Court of Cassation.

Interesting things happening elsewhere in the world: MasterCard announced it is collaborating with Pakistan’s NADRA Technologies to optimize national ID cards with electronic payments functionality. “The move will allow Pakistani citizens to carry out financial transactions and receive government disbursements by utilizing the unique 13-digit identification number of their identity card. Citizens will also be able to use their national ID to send and receive domestic and international remittances, eliminating the requirement to physically visit a bank branch or currency exchange house to meet their money transfer needs.” MasterCard will manage payment processing for transactions completed using the ID cards.

The CBE is looking to build up the auto-feeders industry: The CBE committee looking into developing a strategy for the auto industry is focusing on diversifying and advancing components manufacturing. It’s plan: starting first with less complex components such as tires, car batteries, and windshields, and gradually working towards more advanced products such as engine parts, sources from the auto-industry development committee tell Al Mal. The committee is in talks with auto industry players and banks to discuss alternative measures.

Cabinet strengthens the role of the Supreme Investment Council: The Ismail cabinet approved amendments to the current draft of the Investment Act in its Wednesday meeting. The amendments will require the government to run any major economic policy decisions which would affect investments past the Supreme Investment Council, according to Al Ahram. Other decisions Ismail’s cabinet made during its weekly meeting include:

• Ratifying a KWD 35 mn (USD 114.6 mn) funding agreement with the Kuwait Fund for Arab Economic Development to establish a desalination plant in Port Said;
• Approving the amendments to the executive regulations of the University Organization Act.

Oh happy day, oh happy day: Prosecutor General Nabil Sadek has ordered an investigation into TV host Ahmed Moussa for broadcasting leaked recordings of former Army Chief of Staff Sami Anan, saying Moussa’s action put Egypt’s national security at risk and constituted a breach of Anan’s privacy, Al Mal reports. Moussa had broadcast on his show, ‘Ala Mas’ouleety, the leaked recordings of a phone call between Anan and former vice president Mohamed El Baradei from March 2011 as “evidence” of the latter’s disdain of political and revolutionary figures during that time. We truly pray this is the beginning of the end for the creature.

UK Prime Minister Theresa May announced the Brexit strategy on Tuesday and it looks like the negotiations might be a slog. Brits are looking to both break with the EU and discuss a new free trade agreement in just two years’ time, CNN says. The country will begin the countdown and discussions in March. But experts say the window is too tight to work out a new agreement, especially since EU officials might “want to take a hardline in negotiations” to make an example out of the UK. Prime Minister Theresa May said she is confident that both sides could come to a understanding to satisfy both sides, but added that "no deal for Britain is better than a bad deal for Britain." The UK will also have to look forward to negotiating trade agreements with around 50 other countries.

Other leading international stories include Senegal impending invasion of Gambia to pressure longtime Gambian ruler President Yahya Jammeh to step down from power, the BBC reports.

The details of Egypt’s USD 12 bn agreement with the IMF were in the international media’s spotlight last night. The Associated Press focuses on reforms, but briefly recounts the difficulties brought on by the severe currency devaluation. In a fairly extensive report, Reuters writes that Egypt is “on track to receive the IMF Loan’s second tranche,” but notes also the dangers that further austerity measures can present.

Reading boring news can help understate the dynamics of the political discourse in Egypt now, Nathan Brown and Mai El Sadany write in a piece for the Carnegie Endowment’s Diwan portal that comes off a tad schizophrenic. They note that Egyptian leadership currently “still has murky lines of command and decision within its own ranks. What seems to be emerging is a state ruled from the presidency, the military, and the security bodies with the relations among them hidden from public view. However, the results of their decisions and the general contours of the regime they are building are fairly clear for those who read the boring news.”

The Associated Press took note of the mass arrest of Islamists and alleged Ikhwan supporters in the weeks leading up to the 25 January anniversary, covering the arrest of nine alleged Ikhwan leaders that planned to “disrupt order and security” on the day of. The men had reportedly scheduled meetings a day before to plan how to exploit current economic conditions and provoke public opinion. 145 civilians were also reportedly referred to military prosecution, for their alleged involvement in two high-profile assassinations, and more are expected to follow, a (totally unbiased and dependable) source told the Anadolu Agency.

Meanwhile, Mohamed Aboutrika’s woes (him being branded a terrorist) continued to receive coverage on everything from Reuters to TMZ.

A Cairo court handed down four suspended prison sentences and fines for the death of 17-year-old Mayar Mohamed Moussa after undergoing FGM, The Guardian reported. The sentences were criticized as lenient by legal experts. Mayar’s mother, doctor, and anesthetist were given a one-year suspended prison sentence. The doctor was fined EGP 5,000 and both Mayar’s mother and the anesthetist were given fines of EGP 1,000. The nurse, who is in hiding and has not appeared in court, was given a five-year suspended sentence and an EGP 50,000 fine, which will be reduced if she later appears court. “It is unfair and unjust and will be ineffective as it sends the wrong signal,” said Mayar’s lawyer Reda El Danbouki.

CNN has taken notice of Egypt’s all-woman roller derby team CaiRollers, saying that they are part of a global resurgence in the unlikeliest of capitals. The CaiRollers have a friendly against Abu Dhabi later this month, and against Marseilles’ league in April at the Cairo International Stadium. The two events mark the first significant derby matches within the Arab world. Originally popular in US, roller derby has been coming back since its 2001 revival on a flat, rather than oval track.

Other mentions of Egypt in the international press today:

• An independent Irish MP is visiting Egypt to lobby for the release of Irish-Egyptian detainee Ibrahim Halawa, who was arrested in connection with pro-Ikhwan protests in 2013, according to Galway Independent;
• Egypt has asked Hamas to handover 20 individuals with suspected ties to Daesh and tighten security along the Gaza border, before it can sit down for talks to improve relations, Jewish Press said;
• A group of lawyers and activists will reportedly file a lawsuit against President Abdel Fattah El Sisi for “greenlighting” the Grand Ethiopian Renaissance Dam (GERD) last year, Middle East Eye says…because of course, El Sisi determines Ethiopian economic policy.
• The recipient of the Italian government-sponsored Giulio Regeni Scholarship will be a 16-year-old Egyptian who will study for two years in the same high school that Regeni himself had attended, according to a story by La Repubblica (Italian).

When will a cabinet shuffle give us hope in the way forward, Ismail Abdel Gelil wonders in an exclamation-mark-littered column penned for Al Masry Al Youm. Lamenting the endless cycle of cabinet shuffles, Abdel Gelil says there is an evident defect in the ministerial selection process that results in a large discrepancy between President Abdel Fattah El Sisi’s vision for the country and the steps being taken on the ground.

One of the most influential women in the world talks about education: Nemat ‘Minouche’ Shafik, the British-Egyptian deputy governor of the Bank of England and the next director of the London School of Economics discussed education and the rise populism for The Economist’s The Agenda series. Minouche tells editor-in-chief Zanny Minton-Beddoes about her first exposure of populist uprisings: “Egypt had a very populist phase after the revolution [of 1952] … my own family was nationalized and lost all of their property and I personally experienced massive downward social mobility as a result of that … it makes me very sensitive to how very well-intentioned but very misguided policies can go terribly wrong and it also makes me feel very passionate about education.” She suggests that a starting point would be a model, possibly derived from the German one, that is modified to be able to retool people with skills they might need to redevelop. Minouche also says “experts” are guilty of overselling what can do, particularly given the limits of they know and don’t know, and should focus on being able to communicate to wider audiences more effectively (runtime 06:32).

The Oil Ministry is establishing four new petrochemicals projects worth a combined EGP 1 bn, Oil Minister Tarek El Molla told Al Masry Al Youm. The projects come as Egypt looks to maximize the petrochemicals value chain. Speaking at the general assembly of The Egyptian Petrochemicals Holding Company, El Molla stressed the importance of taking into account the availability of domestic production inputs, or the possibility of importing to bridge the gap between supply and demand to maintain production at these new projects.

Dana Gas operations and investments were not affected by unpaid receivables from EGAS, a senior official at EGAS told Al Mal. Dana Gas had earlier said it will have to review its 2017 investment plans for Egypt if the country does not repay dues by the end of the year.

The Supply Ministry is setting strict new requirements for wheat supply in the season starting mid-April to avoid the mishaps from last year, Supply Minister Mohamed Ali El Sheikh told Al Masry Al Youm. The guidelines will be set in coordination with the ministries of agriculture, trade and industry, local development, and finance within the coming three weeks and presented to the Cabinet by mid-February, he added. The guidelines will include banning non-sealed storage. Beyond this, El Sheikh didn’t really state what distinguishes this year’s procedures from last year’s. As for sugar collection, the High Committee on Sugar will be holding meetings to decide on how much to raise the price of beets, which currently stand at EGP 270 per tonne, Al Borsa reports. Farmers are pushing for the price to go as high as EGP 600, while sugar producers are pitching a price of EGP 400.

PM Sherif Ismail reinstated the levy on imported sugar and rice on Wednesday, but reduced the custom tariff on the two commodities to 14% from 20%, Al Mal reports. Sugar and rice imports had been exempt from custom tariffs from May and until December 2016.

Egypt’s Golden Gate Tourism and Real Estate is partnering with Kuwaiti investors to establish a EGP 200 mn company for touristic and real estate development, as well as a media production company, Al Borsa reports. Egyptian investors will collectively hold a controlling stake of 51% of the new venture and the partners are already in talks to acquire land in Cairo and on the Mediterranean Sea coast for planned residential and touristic projects, Golden Gate’s Chairman Moataz El Sisi tells the newspaper. The identity of the Kuwaiti investors was not revealed.

The General Authority for Investment and Free Zones (GAFI) is expected to auction off 10 mn sqm in the Red Sea governorate for tourism and industrial projects aimed at pulling in EGP 49 bn in investments, the head of Red Sea investments Salah El Gamal told Al Borsa. According to El Gamal, potential investors will be required to present feasibility studies and disclose the sources of funding.

Tourism Minister Yehia Rashed is looking into implementing articles of the Tourism Act which would limit how many trips abroad travel agencies can book for Egyptians. The articles set this limit at 20% of a company’s business. While the move is meant to ensure that companies focus on drawing in tourists and USD, some industry insiders worry that this would limit Egyptian’s ability to travel to Mecca for the pilgrimage, Al Shorouk reports.

The United Kingdom’s Minister of State for Security Robert Ben Wallace has taken a page out of Russia’s How to be Vague manual, saying that the UK is planning on reestablishing flights to Sharm El Sheikh “soon,” Al Shorouk reports. According to Wallace, there are currently 32 weekly flights from the UK to Cairo, Hurghada, and Luxor that bring 100,000 tourists.

Tech-maker Lenovo is looking to double its market share in Egypt to 14% during 2017. In a lengthy Q&A, Lenovo Egypt’s Smartphones Sales Manager Sherif Salem tells Daily News Egypt that the company was able to maintain its market share during 2016 despite a 30% drop in sales volumes.

Naeem Holdings’ brokerage arm, Naeem Shares and Bonds (NSB), officially joined the Nasdaq Dubai’s Equity Futures platform on Wednesday, Al Borsa reports. The move is part of NSB’s plan to expand its client and activities network by attracting more investments from the MENA, US, and Europe. Nasdaq had launched the Equity Futures platform last September.

The Finance Ministry rejected a plan by the Social Solidarity Ministry to reduce the minimum age required to benefit from the Takaful and Karama pension programs to 60 years from 65, Social Solidarity Minister Ghada Waly told Ahram Gate. The Finance Ministry said the move would conflict with the Insurance and Pensions Law, which sets the minimum age (and probably to guard against an added fiscal burden), she added, but the proposal was sent to the Egyptian Council of State for further study. This comes as the House of Representatives is pushing through legislation that will increase pensions of civil servants and military personnel. The legislation is currently being reviewed by joint committee which includes MPs from the labor, social solidarity, planning, national security committees, Al Masry Al Youm reports.

Israel said it increased the height of the electric fence along part of its border with Egypt to “shut down irregular migration routes.” The height of the fence was raised to eight meters from five meters tall. Israeli authorities say additional detection devices, had "significantly curbed the flow of illegal infiltration into Israel, with only 11 successful attempts to cross the fence throughout 2016." The border fence stretching from the Gaza Strip to the Israeli Red Sea resort of Eilat and was completed in 2014.

Egypt will be stuck with record-breaker Essam El Hadary as its only fit goalkeeper for the remainder of the Africa Cup of Nations following the injury of first-choice Ahmed El Shennawy. CAF has reportedly refused Egypt’s request to call an injury replacement for El Shennawy as rules state that a replacement player cannot be called up later than 24 hours before a team’s opening game of the tournament. El Hadary made history on Tuesday by becoming the oldest player to ever play match in the African Cup of Nations. Egypt’s third goalkeeper, Sherif Ekramy, is being treated for a hamstring strain.

Egypt’s handball team defeated Argentina 31-26 in the 2017 World Championship, securing a spot in the knockout stages, King Fut reports. Egypt will face Sweden in the final round on Friday for the second place in Group D, with first place currently held by Denmark. The top four out of six teams in each group advance to the knockout stage.

Two Saudi patients involved in an organ trafficking case are no longer in custody, the Saudi Arabian embassy in Cairo confirmed on Wednesday. In a statement picked up by the Saudi Gazette, the embassy noted that Jaiz Al Shammari died from complications caused by his kidney transplant, while the second patient Abdullah Al-Shabrami was released on bail and transferred to the ICU at a state-owned hospital at his own expense. Saudi authorities are working hard to lift a travel ban authorities had imposed on Al-Shabrami pending investigations, according to the newspaper.

President Abdel Fattah El Sisi inaugurated the newly renovated Museum of Islamic Art, on Wednesday, Daily News Egypt reports. The museum was damaged by an explosion targeting the Cairo security directorate in 2014, which had killed four people and injured 76 others.