The IMF is signaling that there is (some) breathing room for Egypt on fuel subsidies

We think the International Monetary Fund has told the Ismail government that the world will not end if fuel subsidies aren’t cut on 1 July when consumers are tapped-out after spending on Ramadan and Eid El Fitr — and in the run-up to an expensive time of year marked by spending on summer vacation, school fees, Eid Al Adha, hajj, etc. Speaking with Lamees El Hadidi last night, IMF Egypt Mission Chief Chris Jarvis said the IMF backs Egypt’s plan to phase-out energy subsidies over three years and to bring inflation down into the single digits. But critically, he also said that the IMF would leave the timing of the subsidy cuts to the Ismail government. If you’re impatient, skip straight to Lamees’ interview with Jarvis in English here (runtime: 14:21)

Judge for yourself: Asked about subsidy cuts, Jarvis said, “We did talk about energy subsidies because they’re a very important part of the government’s program. I think it is important to realize that even now, after some of the increases in fuel and electricity prices, energy prices still amount to about a fifth of the government’s budget (excluding interest). That’s money that could be spent on other things like health or education or social benefits. But the president and the government are very conscious of that, and they have a plan to eliminate fuel subsidies on most products — on the main products — within about three years. We think that’s a good plan. We leave the precise timing of measures to reduce subsidies to the government to decide, but we strongly endorse that objective of spending less on fuel subsidies — which often benefit better-off people with big cars and big houses — and spending more money on health, on education and on social benefits.

Lamees: “Will we be expecting in the coming year another reduction of energy subsidies?”

Jarvis: “Well, as I said, it’s for the government to both decide on and announce the particular measures that it is planning to take.”

A slight delay in subsidy cuts would assuage the concerns of a number of economists who have warned that fuel price hikes this summer would drive inflation up again just as it is on a declining month-on-month trend. It also meshes with rumblings we’re hearing about the government acknowledging that inflation could remain in the 20% band for a good portion of the coming fiscal year, as Bloomberg noted yesterday. And if you accept that they’re right, it meshes with IMF boss Christine Lagarde’s statement a month or so back that the most important thing for Egypt to do right now is get a handle on inflation. We have more on Jarvis’ interview in Last Night’s Talk Shows, below.

Egypt will begin unloading its first shipment of Iraqi crude today before transporting it over to refineries, Petroleum Ministry officials tell Youm7.

CIB was named Euromoney’s Best Bank on the Middle East for 2017 at an awards ceremony in Dubai last night, marking the first time an Egyptian bank has taken home the regional honor. Euromoney’s statement singles out our friends for their hard work, specifically noting that it is recognizing “Egypt’s unmatched management at Commercial International Bank, the local banking sector’s biggest private-sector profit earner. As it steers through a market with great potential, but where conditions are rarely easy, CIB is worthy of the title of best bank in the region.” CIB Chairman and Managing Director Hisham Ezz Al Arab said last night in Dubai that, “We are honored to be the first Egyptian private bank selected by Euromoney for this prestigious award category. This is another momentous testimony, not only for CIB’s consistent growth and performance, but to the outstanding capabilities, strength and stability of the entire Egyptian banking sector.” You can read Euromoney’s note about the award here and check out CIB’s press release on the win here (pdf).

Cairo American College startup records EGP 40k in sales in first month of product launch. Zip & Flip, a business owned by students participating in CAC’s Injaz program, is closing in on a 200-unit sales milestone just days ahead of this weekend’s inter-school competition in Cairo. Zip & Flip’s signature product is a stylish, functional bag-towel combo: “Its waterproof lining keeps your valuables dry and when it opens up, you have a beautiful towel to share on the beach with your friends,” the company said. You can check out Zip & Flip and real-world reviews of its product on Facebook and Instagram or read their first-ever press release here (pdf).

NO COMMENT- Supporters of Turkish buffoon Recep Tayyip Erdogan beat the daylights out of Kurdish protesters on Embassy Row in Washington, DC. (Watch, runtime: 2:20)

Voters in Iran go to the polls tomorrow to elect a new president. A win for hardliner Ebrahim Raisi — around whom conservative forces rallied this week — could put more distance between Iran and the rest of the world. Raisi blames “the west” for Iran’s economic challenges. Incumbent Hassan Rouhani is a substantially more moderate option.

US President Donald Trump heads to Saudi Arabia this weekend for his first trip abroad since moving into the Oval Office. President Abdel Fattah El Sisi will be in town at the same time, and pundits believe there is a good chance the two will have some face time. NPR has a preview of Trump’s visit, while the Financial Times notes that top bosses at JPMorgan Chase, Citi, Morgan Stanley, Dow Chemical, Blackstone and General Electric will be accompanying Trump “seeking to sign [transactions] and strengthen ties with the kingdom at a moment where his business agenda has been in doubt.” Described by the New York Times as a reluctant traveler, Trump will be hitting five countries in nine days, including Saudi, Israel, Belgium, Italy and the Vatican.

The Central Bank of Egypt’s Monetary Policy Committee will hold a rare Sundaymeeting on 21 May to discuss interest rates. Thirteen of 14 economists surveyed by Reuters expect the MPC to leave rates on hold despite the IMF suggesting they remain an appropriate tool through which to cool-off inflation.

The IMF’s executive board is yet to disclose when it will meet to review and vote on the staff-level agreement to disburse the second tranche of the USD 12 bn extended fund facility by the end of June.

Slush funds in the spotlight: The Finance Ministry is working with Prime Minister Sherif Ismail to compel all ministries and government agencies to compile reports on special funds under their control, and will present the reports to the House of Representatives for review.

Siemens will begin commercial operations on 12 turbines at the Beni Suef, Burullus, and New Capital power plants next week at a combined production capacity of 4,800 MW, Al Borsa reports.

Nile University is inaugurating its 2017-18 Business School Guest Speakers Series with a talk headlined “Is the IMF-Egyptian program for economic restructuring on the right track?” Speakers on the panel discussion will include former supply minister Gouda Abdel-Khalek, former finance minister Ahmed Galal, and Nile University business school dean Hassan Aly. You can register to attend here if you’re so inclined.

On what was the most boring night on the airwaves this week, the only development of note was substantial: IMF Egypt Mission Chief Chris Jarvis’ video call with Hona Al Asema’s Lamees Al Hadidi.

The IMF is not throwing us under the bus: Jarvis told Lamees that the IMF was particularly pleased with the Egyptian government’s efforts to cut fuel subsidies over the next three years and push inflation figures down to single digits, implying — in the most subtle way possible — that the Fund will not be pushing Egypt to hike fuel prices come July. Energy subsidy reforms are necessary, Jarvis said, as they will allow the government to better allocate its resources towards health and education.

IMF board to sign-off on the institution’s staff-level agreement with Egypt over the coming weeks: The IMF’s Executive Board is expected to meet in a few weeks’ time to sign off on the second tranche of Egypt’s USD 12 bn bailout package, Jarvis also told Lamees, encouraged by a strong budget plan for FY2017-18 that outlines clear paths for deficit reduction and promises a primary surplus for the first time in years. Economic reform measures are also expected to reduce sovereign debt this fiscal year, he added, praising efforts to curb inflation and widen the social safety net.

Jarvis also told Lamees that the EGP float and recently-approved investment and industrial permits acts will also drive growth and improve the overall investment and business climate in the next fiscal year and beyond. (watch, runtime: 14:21).

Over on Kol Youm, a clamorous Amr Adib was on the prowl for presidential candidates for 2018 and seemed as genuinely upset as he is able to mimic over the fact that no one has yet announced their intention to run (watch, runtime: 1:06).

He was quick to get over it though, and moved on to an interview with Portuguese footballer Cristiano Ronaldo’s family that ONTV had filmed earlier in the day at the Giza plateau (watch, runtime: 7:54).

Egypt expects inflation to remain above 20% during the next fiscal year, Tamim Elyan and Ahmed Feteha write in Bloomberg. Deputy Finance Minister Ahmed Kouchouk says the government is planning an aid package that will “target public servants, low-income tax payers and recipients of food subsidies.” The details of the plan will be announced “soon,” he said. This comes as the government now believes inflation will be in the 20% band during a good portion of the 2017-18 fiscal year, eventually easing to 9.7% in FY2018-19.

Kouchouk also told Bloomberg that the budget deficit for the first nine months of the FY 2016-17 dropped to 8% of GDP, from 9.4% a year earlier, with primary deficit falling to 1.2% of GDP from 2.9%. He added that Egypt plans to raise USD 1.5-2 bn in international bonds next week to cover FY 2017-18’s financing gap, with the following international bond sale possibly being in early 2018.

Bloomberg also took note yesterday of President Abdel Fattah El Sisi’s interview with the editors of state newspapers, in which El Sisi promised tax breaks and improved availability of subsidized staples ahead of Ramadan in a bid to help families struggling with inflation to prepare for the Holy Month.

SODIC is looking to expand its land bank: SODIC is looking to buy EGP 600 mn worth of land in north and west Cairo, Managing Director Magued Sherif told Ehab Farouk of Reuters’ Arabic service. Sherif says SODIC, which is already working on 10 residential projects, is finalising the processes to register 300 feddans of land in west Cairo to be developed for residential purposes in 2018. The company controls a land bank of 5.3 mn sqm in total and is hoping to find suitable plots in Ain Sokhna or by the Red Sea. Sherif says SODIC invested EGP 445 mn in 1Q2017 out of a planned EGP 3 bn for the whole year and that the company will be looking to secure an EGP 500 mn credit facility before the end of 3Q2017 to finance expansions. He also said SODIC is considering issuing dividends.

Smaller oil and gas operators may miss out on the second wave of payments to international oil companies (IOCs) the central bank is planning on dishing out, LeAnne Graves writes for The National. Governor Tarek Amer had said Egypt had made a payment of USD 750 mn to IOCs and will make a similar payment by 1 June. With both payments, Egypt’s arrears to IOCs would be brought down to USD 1.5 bn. “One small operator in Egypt, pumping about 10,000 barrels of oil per day, said payments from the government came in [EGP] with a ‘dribble of [USD]’. The executive, who asked not to be named, said some vendors were taking [EGP], but the firm didn’t have enough to pay anyone who wanted [USD],” Graves writes. Allen Sandeep at Naeem’s research arm expects “the amounts that would be paid per IOC would be proportionate to their part of the total outstanding amount of [USD 3.5 bn] as a whole.”

That comes as sources in government tell Al Shorouk that IOCs will be paid in full by the end of June 2019 under the terms of Egypt’s USD 12 bn bailout agreement with the IMF. The Sherif Ismail government committed to a schedule that will see it pay USD 1.2 bn before the end of FY2016-17, another USD 1.2 bn before the end of FY2017-18, and USD 1.1 bn during FY2018-19. Central Bank governor Tarek Amer had announced on Tuesday that Egypt recently paid USD 750 mn to settle part of its debts to IOCs and suggested that a further USD 750 mn would be made available in early June.

Meanwhile, Dana Gas is restructuring its debt as it struggles with dues owed by Egypt and Kurdistan. Lenders holding some USD 700 mn in Dana Gas debt have appointed investment bank Moelis and a Manhattan law firm to negotiate a restructuring of the company’s sukuks. Dana Gas faces a receivables backlog of about USD 1 bn from Egypt and Kurdistan, Reuters reports.

MOVES- Abraaj managing partner and global head of private equity Mustafa Abdel Wadood has joined the board of directors of Orascom Construction, the company said in a statement (which includes a nice bio of Mustafa), replacing Abraaj founder and group CEO Arif Naqvi. Naqvi steps down on 23 May 2017. Mustafa, well-known to many longtime Enterprise readers from his stints at OT, Sigma and EFG Hermes before he joined Abraaj, will take his seat on OC’s board on 1 June.

Ride-hailing app Careem has expanded operations into seven new cities in the Nile Delta, the company announced in a statement on Wednesday (pdf). The addition of Mahala, Banha, Tanta, Mansoura, Damanhour, Kafr El Dawar, and Zagazig, extends Careem’s network to 10 governorates and comes as part of the company’s plans to grow its coverage to the whole of Egypt.

MOVES- Siemens Healthineers appointed Michael Schmermer as the new Managing Director of the company’s operations in Egypt. Schmermer “will continue to drive Siemens Healthineers’ growth strategy and expand the company’s local footprint.” He succeeds Mohamed El-Wetidy.

Egypt will be an active participant in the Arab-Islamic-American summit in Riyadhnext week, President Abdel Fattah El Sisi revealed in the second installment of his interview with the top editors of state-run newspapers. The Middle East peace process and resolution of the Syrian and Libyan conflicts are likely to top the agenda, according to El Sisi, who believes that US President Donald Trump — who is also expected in Riyadh this weekend — is key to diffusing the tension between the Palestinian and Israeli sides.

With 2018 set to be an election year, El Sisi did not answer directly when asked whetherhe would run for a second term in office, preferring to “cross that bridge when we come to it.” The president added that he hopes to one day see a smooth transfer of power in Egypt to a strong and capable leader elected by popular will.

On the domestic front, El Sisi told the editors that while terrorism continues to be apertinent risk, it no longer poses a threat to Egypt’s stability. His administration, he said, is working hard on the legislative and social fronts to battle fundamentalist ideology and modernize Egypt’s religious discourse. Efforts to develop the educational system and eradicate illiteracy are also ongoing, the president added, explaining that a national literacy campaign is in the works and that his periodical youth conferences will continue to be held to provide a platform for direct communication with the youth population. In the same vein, the state is also working on strategies to curb accelerating population growth, where we’re adding something to the tune of 2.5 mn citizens a year.

The president also stressed that there is no tension between himself and the judiciary over recent amendments to the Judicial Authorities Act.

After 15 years of extensive renovations and restoration work, the Aisha Fahmy Palace in Zamalek opened its doors to the public once again yesterday, serving as an arts and culture complex. Built in 1907 by Slovenian / Italian architect Antonio Lasciac for Ali Pasha Fahmy’s daughter, years of neglect left the historic Nileside building in a state bad enough to demand EGP 30 mn in renovation work. The interior of the 30-room palace is adorned with European-style decorations and unique silk and linen paintings. The palace has previously served as an exhibition space for works by artists including Pablo Picasso and Salvador Dali, as well as Mohamed Ali Pasha’s family’s jewelry collection.

We’ve been blessed with another day of wonderfully light coverage of Egypt in theforeign press, with many outlets picking up the Associated Press’ coverage of President Abdel Fattah El Sisi’s meeting with Jordanian King Abdullah II in Cairo yesterday. Sputnik is also joining the conversation with its own story that centers on the two leaders’ discussions on the situation in Syria.

There are two recent signs that suggest Pope Francis’ trip to Egypt “may have been a papal trip that mattered,” Crux Editor John Allen Jr writes. “One is the construction of a new Christian church with Muslim support, the other legal charges against a powerful Islamic cleric who called Christians and Jews ‘infidels.’” It is still too early to judge the impact of the trip, he says, but “recent days have brought intriguing signs that the pontiff’s message may have captured a moment.”

Former US ambassador to Cairo Daniel Kurtzer has waded into the debate over US President Donald Trump’s alleged blurting out of national security information during a sit-down with the Russians. The piece for Forward, the venerable weekly on Jewish-American interests, is headlined “Why Trump’s Loose Lips May Be ‘Extraordinarily Dangerous’ — To Israel And Us.”

Otherwise, the only story out there rising to the level of even mildly interested is The Australian’s (paywall) tale of a Coptic Egyptian family that was denied residency Down Under.

Habib El Adly’s “escape” saga is the stuff of which Ramadan soap operas are made, and what happens in the series finale is anyone’s guess, Al Masry Al Youm’s Mohamed Amin writes. The public will likely follow the drama series closely, Amin says, postulating that the Mubarak-era Interior Minister may have given security forces the slip in a strategic move to embarrass the ministry he once headed. Fahmy Howeidy also takes to the pages of Al Shorouk to liken El Adly’s escape to a badly produced film whose writers foolishly think viewers will actually believe the plot. Howeidy pokes holes in the story being presented about why the former Interior Minister has yet to fulfill his prison sentence, and reaches the conclusion that Mubarak-era figures are unlikely to be held fully accountable for the crimes they are accused of committing.

You can now get a tattoo that actually plays back audio: A tattoo artist developed an app that takes an uploaded audio file — anything from a baby crying to the chorus of your favorite song — and creates a design of the audio’s soundwaves. Users can then get a certified tattoo artist to memorialize said audio with a “soundwave tattoo” that the app will read and play back, Mashable explains (runtime 1:44).

Jordan’s King Abdullah II met with President Abdel Fattah El Sisi in Cairo on Wednesday for talks on the Palestinian-Israeli peace process and cooperation on counterterrorism, Ahram Online says reports. Abdullah’s one-day visit comes ahead of the Islamic-American summit slated for 21 May in Riyadh. Jordan News Agency (Petra) also covered the meeting.

The Nile Basin Initiative (NBI) reportedly said that it rejected Egypt’s request to join the Entebbe Agreement since the country still believes in its right to a larger share of the Nile’s water, Al Shorouk reports. Egyptian officials dismissed the statements, denying ever having asked to sign the pact. Instead, they said, Egypt has been trying to find a way to cooperate with NBI countries outside of the Entebbe Agreement and has been in talks to reactivate its NBI membership.

Egyptian and Italian prosecutors will sign an agreement before the end of the month to retrieve CCTV footage from the Dokki metro station where Italian researcher Giulio Regeni was last seen before being kidnapped and murdered last year, Prosecutor General Nabil Sadek said yesterday, Ahram Gate reports. Egypt handed over yesterday new documents Italy had requested for its investigation into Regeni’s murder, Sadek and Italy’s Deputy General Prosecutor Sergio Colaiocco said in a joint statement following their meeting in Cairo, Al Shorouk reports. Egyptian prosecutors had previously disclosed documents in March in response to an Italian request, according to the statement.

Egyptian Defense Minister Sedki Sobhi met with US National Guard Bureau Chief, Air Force Gen. Joseph L. Lengyelin Cairoon Wednesday, Ahram Online reports. Lengyel also met with Egyptian Armed Forces Chief of Staff Mahmoud Hegazy for talks on cooperation in military training.

Representatives from 20 Omani companies sat down with officials from 48 Egyptian companies in one-on-one meetings in Cairo on Wednesdayto explore potential partnership and investment opportunities in various industries, including food production and building materials, Al Borsa reports.

Rosneft and Eni have signed an agreement to “broaden cooperation” and possibly include the joint sale of oil product supplies to Egypt, Reuters reports. “Rosneft said the agreement calls for expanded cooperation in hydrocarbon production, refining, marketing and trading, including in the Egyptian Zohr offshore project, where Eni controls 50 percent, Rosneft owns up to 35 percent and BP up to 15 percent. Rosneft also said it had agreed with Eni to look into cooperation in oil refining in Germany.”

BP has completed 53% of the development work being carried out at the North Damietta offshore concession’s USD 3.8 bn Atoll field, including drilling three deepwater wells 950 meters below the water’s surface, the Oil Ministry said in a statement yesterday. The field, which holds about 1.5 tcf of gas reserves, is expected to begin producing 300 mcf/d and 8k bbl/d of condensates by December 2017.

The General Authority for Supply Commodities (GASC) purchased 295k tonnes of wheat from Ukraine, Russia, Romania, and the United States, to be delivered between 15 and 24 June, Al Mal reports. The US, which sold Egypt wheat earlier in May for the first time in four months, offered two of the lowest prices in the tender GASC issued on Tuesday, Bloomberg reports. Egypt raised its requirement for the wheat’s protein content, which pushed France out of the mix but bode well for the US, which has “plenty” of the higher-protein wheat.

The Eastern Tobacco Company will be producing up to 15 bn cigarettes for Philip Morris International at USD 5.8 per 1,000 units and between 15-22 bn cigarettes at USD 6.2 per 1,000 cigarettes, the company said in a regulatory filing (pdf) on Wednesday. Philip Morris will pay Eastern Company in EGP using a fixed exchange rate of EGP 18 to the greenback, as we had noted previously.

Austrian packaging manufacturer Alpla launched a new EUR 25 mn plant in 10th of Ramadan City yesterday through its joint venture Alpla Taba, according to Plasteurope.com. Alpla had bought a majority share in Taba Group acquired in 2015 a plant in El Obour City from Greece’s Argo.

LG Egypt is set to start production on its new washing machine line at its 10th of Ramadan City plant before year’s end, an unnamed company official tells Al Borsa. 60% of the units will be earmarked for export, he adds. We had noted earlier that the line is set to produce up to 9,000 units a month.

Members of the House of Representatives’ Health Committee raised a stink about the budget allocation for healthcare projects in FY2017-18 during Wednesday’s discussion session, Al Shorouk reported. MPs said that the EGP 54 bn allocation is not enough to cover the country’s needs, especially since EGP 13 bn of those are going into sanitation and drinking water projects — which they said should not even be part of the country’s healthcare budget. Including military- and police-run hospitals in the budget was also a point of contention. Budget discussions are also ongoing over at the House Committee on Housing.

The government plans to reclaim 421 feddans of state-owned land in 10 governorates by the end of May, the Interior Ministry said on Wednesday, according to Ahram Online.

GB Auto kicked off a new promotional campaign on Wednesday offering discounts of EGP 10-17k on select models of its Geely, Hyundai, and Chery brands in a bid to stimulate market demand. The company is also offering a year of free after-sales services for new purchases of Hyundai’s Tucson model.

The decision by the Finance Ministry telling Misr for Central Clearing, Depository, and Registry (MCDR) not to collect capital gains tax on stock market transactions enforces a stay on the tax’s application until the House of Representatives reconvenes on 29 May, sources told Al Mal. The Ministry’s decision effectively waits for parliament to vote on the capital gains tax law fully and implement it. The parliament’s planning and budget subcommittee had amended the income tax law to include a clause allowing for not collecting capital gains tax from 17 May until the final law comes into effect. Capital gains tax is expected to be levied at 0.125% on each side of the transaction from when the law comes into effect to 30 May 2018, and increased gradually from there. Al Borsa, on the other hand, reports that EFSA has asked investment funds to set aside the payable capital gains taxes starting from 17 May, in order to be able to calculate the funds’ net asset values accurately.

The Central Bank is close to finalizing amendments to Egypt’s banking laws, CBE Governor Tarek Amer told senior banking and industry executives on Wednesday, according to Ahram Gate, without specifying details. Amer also urged the executives to begin making plans to open branches in the new administrative capital, where President Abdel Fattah El Sisi said most government offices will be moving by the end of 2018.

Egyptian labor advocacy groups are not too happy with the proposed Labor Act currently being discussed by the House of Representatives and will be drafting a memo for MPs with their objections, Al Mal said on Wednesday. The Labor Act is meant to outlaw discrimination in the workplace and strike a balance between the needs of workers and employers.

Happy International Museum Day: Museums across Egypt are allowing local and foreign visitors in free of charge today to commemorate International Museum Day, the Antiquities Ministry announced on Wednesday, according to Al Ahram.

A misdemeanors court sentenced Housing Minister Mostafa Madbouly to one year in prison and imposed a EGP 30,000 fine for his ministry’s refusal to allow a former ministry employee to return to work at the ministry, Daily News Egypt reports. Madbouly is accused of failing to implement a previous court order to reinstate the employee after the woman as allegedly arbitrarily suspended. The ministry’s legal counsel said it will appeal Tuesday’s ruling, according to Al Mal.