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Tuesday, 24 April 2018

What we’re tracking on 24 April 2018

The state of government finances, part I: Finance Minister Amr El Garhy is rightfully putting the onus on the Central Bank of Egypt to help reduce the cost of borrowing — not just for businesses, but for the state, possibly unlocking bns that today goes to debt service and that tomorrow could help provide more government services or reduce the budget deficit. That’s the take-home message from an interview El Garhy gave Bloomberg while in Washington, DC, for the IMF and World Bank spring meetings.

What’s going on? “Egypt is considering shifting away from costly short-term domestic debt towards longer-term borrowing, as falling interest rates provide cheaper options to finance its fiscal deficit, according to the nation’s finance minister. It will increasingly rely on five- to seven-year bonds instead of Treasury bills that have shorter maturities and currently make up the bulk of local-currency borrowing.”

Inflation (and CBE action) are the triggers to watch: “We’re contemplating this but we’re still waiting for better inflation figures and more action from the central bank.” Inflation in the single digits next year, El Garhy said, should “convince the central bank of taking the interest expense down further.”

The state of government finances, part II: As tempting as it is for journalists and analysts alike to keep hammering at the expenditure side of the government spending equation (what, with subsidy cuts and enhanced spending on health, education, welfare and infrastructure), the business community remains concerned that the Ismail government be tempted to squeeze blood from a stone. A common refrain among business leaders — from owners of SMEs to c-suite officers at large corporations — is that the state not just ensure compliance from existing taxpayers, but widen the tax base. The same applies for fees to access government services: Readers should not be alarmed to read that the government is looking to see revenue from port fees rise by as much as EGP 1.8 bn in the next budget year, as a senior government official told us yesterday. This is likely accounted for by running ports around the clock, fee agreements that bring back major shippers who had walked away from the table in the current year, and an expanded array value-added services, as we’ve recently reported. The government is also raising (or looking to raise) fees for government services including passport issuance, residence visas, and vehicle and gun registration. Expect this to be a theme going forward.

Our friends at Renaissance Capital are holding their third annual Egypt Investor Conference in Cape Town today and tomorrow. Senior management from leading Egyptian companies will meet one-on-one with South Africa-based investors at the gathering. As part of our exclusive coverage of the conference, we interviewed Renaissance Capital MENA CEO Ahmed Badr on his take on Egypt, Saudi Arabia, and the finance industry post-Mifid II. Our talk with Ahmed appears in today’s Spotlight section, below.

The subscription period for retail investors who want a piece of CI Capital’s IPO ends today. The firm’s Mahmoud Attalla was on TV last night talking up the offering. We have more in Last Night’s Talk Shows, below.

Ten people were killed and at least 15 injured in an attack on pedestrians in Canada. A long suspect drove a white rental van across sidewalks in Toronto in an overnight attack that borrows from the terrorist playbook, but that police have so far said does not appear to have been directly related to Islamist terrorism. The home pages of the Globe and Mail and Canada’s CBC have more, and the story is front-page news in the business press globally (Wall Street Journal | Financial Times | CNBC | Reuters).

It’s earnings season in Amreeka: Facebook, Google, Boeing, and Chevron are among those expected to post this week “their strongest first-quarter profit gains in seven years at around 20%,” according to Reuters, which notes that stock performance was muted yesterday ahead of the expected string of earnings reports.

Emerging markets assets are being pressured by rising borrowing costs in the US and the sustained performance of the USD against other currencies. “Equities and currencies [are] down more than 1% and on track for their biggest one-day drops in at least weeks,” Peter Wells writes for the Financial Times. “Higher US yields also make EM assets less attractive for investors and often prompt investors to rotate some of their holdings back into USD-denominated assets.”

Dress like a bn’aire: Season three of Bns, one of our favourite TV shows and the best-ever about finance, “masterfully captures the changing dress code of the finance world.” (WSJ)

Selfie-taking monkeys do not own the intellectual property rights to the images they take, a US appeals court has ruled. (WSJ).

PSA- Expect stronger-than-usual winds and “unstable weather” today in Cairo, North Sinai and the northern cities of Upper Egypt, the national weather service warns.

PSA- YOU DON’T NEED TO GO TO WORK TOMORROW. Pardon our shouting. Banks and the EGX will be closed tomorrow in observance of Sinai Liberation Day. Enterprise is also taking the day off, and we’ll be back on Thursday at our usual time.

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