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Wednesday, 20 December 2017

What we’re tracking on 20 December 2017

The board of directors of the IMF meets today to decide on the release of the thirdUSD 2 bn tranche of Egypt’s USD 12 bn Extended Fund Facility. The board will base its decision on the outcome of the second review of the Sisi administration’s reform agenda, which concluded early last month, and we’re optimistic that it’s in the bag. “Egypt’s economy continues to perform strongly, and reforms that have already been implemented are beginning to pay off in terms of macroeconomic stabilization and the return of confidence,” the IMF had said following the review.

Key economic indicators have continued to improve since then, with annual inflation dropping below the 30% mark in November for the first time this year to 26% (albeit a slower improvement than expected). Reserves are stable, and Egypt’s balance of payments recorded a surplus of USD 5.1 bn during 1Q2017-18, an improvement from a surplus of USD 1.9 bn in the same period of the previous fiscal year. Finance Minister Amr El Garhy has said the funds should be disbursed in January.

The CBE announced on Tuesday that remittances from expats rose by 38.9% y-o-y inOctober to around USD 2.2 bn, according to Reuters. Remittances jumped nearly 40% y-o-y in 1Q2017-18 to USD 6.0 bn, from USD 4.3 bn during the same period last year.

The official launch for production at the Zohr gas field is expected to take place today, said Mario Bello, managing director of Eni JV Agiba Petroleum Company, according to Ahram Online. Production at the 30 tcf gas field began on Saturday with at a rate of 350 mcf/d. Bloomberg Quicktake has a rundown of the benefits Egypt is likely to see from the Zohr gas field. The piece notes the USD 60 mn in savings per month, as initial production rates can replace three LNG shipments. “[Zohr and West Nile Delta] fields can improve Egypt’s balance of payments by narrowing the current account deficit by approximately USD 4 bn and encourage more foreign investment in Egypt’s energy sector,” said CI Capital’s Hany Farahat. That said, the government cannot rely on gas production alone and has to continue to push renewable energy projects and phase-out fuel subsidies, according to EFG Hermes economist Mohamed Abu Basha.

Trade and Industry Minister Tarek Kabil is in Brazil today for a Mercosur summit, Al Masry Al Youm reports. Kabil is attending the summit on behalf of President Abdel Fattah El Sisi, and will work to promote investment projects in Egypt. He is scheduled to meet with his counterparts from Brazil, Uruguay, Paraguay, and Argentina, in addition to the chairman of the Arab-Brazilian Chamber of Commerce.

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