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Sunday, 4 July 2021

THIS MORNING: Ever Given hearing today; OPEC+ postpones supply talks; US hit by ransomware attack; EBRD climate pledge; Two weeks until Eid.

Welcome back to another full work week, ladies and gentlemen. And if you haven’t yet melted in the last few days, we hope you enjoyed the long weekend.

You will have two more full work weeks before the Eid break, which should take place on the week of the 18 July.

We also want to wish our readers in the US a happy 4 July holiday. And it is quite an eventful one for the US, with a number of key events shaping the news across the Atlantic.

Most important of which has to be the end of the US’ longest war, as American troops emptied their main military bases in Afghanistan on Friday, bringing an end to the US’ involvement in the 20-year war, Reuters reports. Far from a joyous event, the narrative in the press is one of ‘mission failed’ as the Taliban look set to fill the void left by allied troops. Everyone from the Associated Press and Reuters to the Financial Times had the story on Friday.

He’s looking for WMDs in heaven now: One of the architects of that war and the war in Iraq, former Secretary of Defense Donald Rumsfeld passed away last Tuesday. His legacy and responsibility for the deaths of hundreds of thousands of people in Afghanistan and Iraq, his endorsement and legal justifications for torture, as well as his reign as among the most powerful secretaries of defense is leading coverage in the global press. And of course, he was the man that gave us this gem of a line when called out on Iraq not having WMDs: “the absence of evidence, is not evidence of absence.”


THE BIG STORY OF THE DAY- CIB kicked off Egypt’s first corporate green bond issuance, which we’ve been waiting for since 3Q2020. The issuance, which saw the IFC invest USD 100 mn, was larger than the initially announced USD 65 mn.

Egypt also signed up to join the world’ first global corporate tax framework, which was developed by the OECD. The agreement could see us get additional tax revenues from tech companies for income generated here in Egypt.

Expect GERD to dominate the conversation all week long: The UN Security Council is expected to meet sometime this week to discuss the deadlock between Egypt, Ethiopia and Sudan. An exact date has yet to be set, but Sudanese sources report that it will take place on Thursday.

We have more on all three stories in the news well, below.


THE BIGGEST STORY ABROAD- Large ransomware attack hits hundreds of US companies: REvil, a Russia-linked ransomware cartel, has been accused of carrying out ransomware attacks on at least 20 managed-service providers, affecting more than 1k SMEs, according to Bloomberg. The story is getting coverage everywhere from the Financial Times and the Wall Street Journal to the BBC and the Associated Press.

GREEN ECONOMY- The European Bank for Reconstruction and Development (EBRD) will not invest in upstream oil and gas projects from the end of 2022 as part of its drive to meet the Paris climate goals, the lender said in a statement on Thursday.

It’s not quitting all fossil fuel projects though: EBRD Managing Director Harry Boyd-Carpenter told Reuters that it will still finance midstream and downstream projects, and didn’t specify whether its new policy towards upstream assets will apply to new or existing investment.

***CATCH UP QUICK with the top stories from Wednesday’s edition of EnterpriseAM:

  • Egypt received its third and final tranche of its USD 5.2 bn standby loan from the IMF. The disbursal of the USD 1.6 bn tranche completes the 12-month program, which was signed off on last June to support our public finances and economy through the pandemic.
  • Current account widens in 3Q: Our current account deficit more than doubled to USD 5.7 bn in 3Q2020-2021, from USD 2.8 bn in the same period last year.
  • Foreign inflows into Egyptian treasury bills continued to gain steam last month, rising to USD 22.3 bn at the end of May from USD 20.9 bn (EGP 327 bn) in April.

WHAT’S HAPPENING TODAY-

Not a moment too soon: Reports have emerged that the Suez Canal Authority (SCA) has inked a USD 540 mn compensation agreement with the owners of the Ever Given ship days before the Ismailia Economic Court was supposed to hold hearings on the compensation case today. So far, the agreement hasn’t been made official, with no official statements from the owners, the ins. companies, or the SCA as of dispatch time. We dive deeper in today’s Dispute Watch.

An Egyptian business delegation is in Iraq today: Headed by Trade Minister Nevine Gamea, the delegation will hold talks with Iraqi business representatives in Baghdad today to discuss business ties, particularly in the commercial and agricultural sectors, the Trade Ministry said in a statement yesterday. This comes less than a week after President Abdel Fattah El Sisi became the first Egyptian head of state to visit Iraq in 30 years, discussing (among other things) economic ties with Iraqi president Barham Salih and prime minister Mustafa Al Kadhimi.

ON THE LEGISLATIVE FRONT- The Unified Budget Act seems to be back on the agenda after being in legislative limbo for the better part of nine months, with Masrawy reporting yesterday that the Senate will today discuss the bill. The new act — approved by the cabinet back in October — brings together several pieces of legislation governing the annual state budget and government accounting into a single bill. The legislation would impose new requirements for the government to ensure fiscal discipline, including spending limits for each ministry, as well as new mechanisms to monitor budgeting performance.

In the words of the great Bone Thugs-N-Harmony: “Wake up, wake up. It’s the first of the month.” Among the handful of dates you should keep your eyes on:

  • PMI: June’s purchasing managers’ index for Egypt is due to be released on Tuesday, Saudi Arabia and the UAE will be out a day earlier.
  • Foreign reserves figures for June will be out early next week.
  • June inflation data will be released next week.
  • Interest rates: The Central Bank of Egypt will not meet this month to review rates. It’s next meeting will take place on 5 August.

ATTENTION LARGE TAXPAYERS- The deadline for large taxpayers that have not yet signed on to the Finance Ministry’s e-invoicing platform lapsed as of Thursday, 1 July. Those who haven’t yet signed on can expect a host of penalties, including removal from large taxpayer classification, losing access to government services and business, and losing subsidies.

And if you haven’t filed your 1Q2021 earnings, your 15-day extension also lapsed on Thursday. The Financial Regulatory Authority (FRA) had given 17 EGX-listed companies another extension to file their 1Q2021 earnings after the two previous extensions (one in May and one in June) lapsed. Companies that haven’t filed their earnings could risk inclusion in the D-List of non-compliant companies.

Egypt has launched an e-visa portal for inbound tourists, the Tourism Ministry said on Thursday. The portal allows travelers to apply and pay for tourist visas online, and is available to citizens from 74 countries in eight languages. Tap/click here to apply for the visa and here for all instructions.

MARKET WATCH-

OPEC+ will resume negotiations to increase global oil supply tomorrow after two days of talks failed to produce an agreement last week, Bloomberg reports. Most oil producers agreed to a proposal that would add 400k barrels per day each month from the beginning of August, but the UAE has reportedly refused to sign on and is pushing for more favorable terms.

The sticking point? The UAE — which signalled it could leave the cartel last year due to the supply cuts put in place in response to the pandemic — appears to be the only member holding out for better terms, and is arguing that the baseline used to calculate its quota is unfair. Abu Dhabi wants to be able to significantly ramp up production and benefit from the bns of USD it has invested in increasing capacity.

What’s at stake? Not reaching an agreement on production quotas will likely pour more fuel on the market, which has run hot in recent weeks thanks to surging demand and tightening supply. Prices have surpassed USD 76/bbl for the first time since October 2018, and some market analysts are forecasting USD 100 oil for the first time in seven years.

And the worst case scenario? A disintegration of the loose OPEC+ alliance and potentially a repeat of last year’s Russo-Saudi oil price war, Bloomberg suggests.

It certainly won’t help us get over the hurdle of inflation: The clash at OPEC+ comes as Dutch central bank president Klaas Knot warned that central bankers are underestimating how bad inflation can get, according to Bloomberg. While the European Central Bank does maintain that global inflation is temporary, Knot warns that this may not necessarily be the case, saying: “We should not overestimate our capacity to determine in advance what is temporary inflation and what is not…There are other scenarios conceivable than our base case of persistently low inflation. Inflation is not dead.”

CIRCLE YOUR CALENDAR-

The aforementioned oil price and inflation concerns will undoubtedly factor into the government’s fuel pricing committee, which is currently meeting to decide on 3Q prices. The meetings, which kicked off last Thursday, should produce a decision by 10 July, but could be extended further into the month, an official tells Al Mal.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

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