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Monday, 3 October 2016

What we’re tracking on 03 October 2016

Welcome back from the long weekend — we hope everyone is set to enjoy a productive, three-day workweek before we’re off again on Thursday for Armed Forces Day. Heading into this morning, it looks as if devaluation will be the dominant story of our week, with the “sleeper” story being the fate of the tourism industry as Russia walks-back talk of direct flights resuming this month on a trial basis.

The big story: Don’t expect the USD 12 bn IMF facility to be approved this week: Finance Minister Amr El Garhy and Central Bank Governor Tarek Amer will reportedly be in DC on Wednesday to lay the groundwork for Egypt’s final push to secure the USD 12 bn IMF facility ahead of the upcoming annual meetings of the IMF and World Bank Group, due to take place on 7-9 October. They will reportedly be joined by International Cooperation Minister Sahar Nasr and Planning Minister Ashraf El Araby.

IMF won’t pass the package before mid-month: El Garhy and IMF Egypt mission chief Chris Jarvis both warned in the past few days that it’s unlikely the IMF’s executive board will pass the facility in the next two weeks, as we note in Speed Round (below).

That hasn’t stopped talk of imminent devaluation, particularly after a research report by Beltone Financial was widely (and breathlessly) interpreted by the domestic press as declaring devaluation would happen basically any hour now.

That said, the facility remains on track: Amer briefed President Abdel Fattah El Sisi on Saturday, telling him “that according to plan the IMF agreement is on its way to be endorsed by the IMF board,” according to an Ittihadiya readout on the meeting. Our take here is that the key is not the expectedly vague content of the statement (pdf), but the fact that the meeting took place — and prompted a statement in the first place. The key quote: “President El Sisi stressed the importance of taking all the necessary measures to reduce the public budget deficit and increase cash reserves, while taking into account the economically vulnerable groups that should not be affected by any of these measures.”

Another parallel market loophole closes: Civil Aviation Minister Sherif Fathi has issued a decree banning the issuing of airline tickets for trips that do not begin, end, or have any connection to Egypt. The measure comes into effect on Wednesday, 5 October. Al Masry Al Youm says the decision as travel agents were booking tickets from Egypt for trips that did not originate or end here, allowing them to benefit from the difference between the official and parallel market exchange rate.

Cheese maker Obour Land will list 200 mn shares at a fair value of EGP 1 per share today. As per EGX regulations the company has six months to launch its IPO, Al Borsa reports. CI Capital is advising.

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