Egypt Conducts Unprecedented Reforms in Attempt to Activate Investment

Nuts are sold at a market, ahead of the Muslim fasting month of Ramadan in Cairo, Egypt, May 6, 2018. (Reuters)
Nuts are sold at a market, ahead of the Muslim fasting month of Ramadan in Cairo, Egypt, May 6, 2018. (Reuters)
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Egypt Conducts Unprecedented Reforms in Attempt to Activate Investment

Nuts are sold at a market, ahead of the Muslim fasting month of Ramadan in Cairo, Egypt, May 6, 2018. (Reuters)
Nuts are sold at a market, ahead of the Muslim fasting month of Ramadan in Cairo, Egypt, May 6, 2018. (Reuters)

The International Monetary Fund on Friday approved the fourth installment of a $12 billion, three-year loan for Egypt, bringing the total released to date to just over $8 billion.

The IMF board approved the latest $2 billion disbursement under the aid deal signed in November 2016 to support Cairo's economic reform program, which the Washington-based lender has repeatedly praised.

Since then, Egypt has imposed harsh austerity measures and started to phase out subsidies on many goods and services, including this month's move hiking fuel prices as much as 50 percent, and electricity rates by about 25 percent.

Consumer prices have soared as the authorities floated Egypt's currency and adopted a value-added tax. Meanwhile, a fiscal crisis caused the deficit to balloon to 12.5 percent of GDP in the 2015-2016 tax year.

The government said the subsidy cuts are needed, and acknowledged they would lead to sharp increase in taxi fares.

The IMF said Egypt is beginning to reap the benefits of the reforms, and estimates the economy will grow 5.2 percent this year. Inflation is expected to fall to 20 percent by the end of 2018 from 33 percent last year.

However, IMF staff in May stressed that the government still needs to strengthen its social safety net

Since the 2011 revolt toppled former president Hosni Mubarak, the economy of the Arab world's most populous country has received multiple shocks caused by political instability and security issues.

The government in Egypt seeks to implement a bunch of reforms for the sake of reinforcing its capabilities to attract direct foreign investment. After more than one year and a half on agreeing over a loan with the IMF, it managed to bring back exchange markets to stability but its debts aggravated.

Egypt borrowed from the IMF in November 2016, after the difference in foreign currencies increased.

The CBE has raised interest rates by a total of 7 percent since the flotation in late 2016 in a bid to curb inflation. The reforms program, adopted by the government in the meantime, included issuance of a new law of investment motifs – the program is backed by the IMF and other international donors.

Egypt sought years ago to lessen procedures for establishing firms, and it developed this service through the center of investors services in which it has become possible to fulfill the establishment in a couple of hours.

Yasser Abbas, head of investors services sectors at General Authority For Investment & Free Zones, told Asharq Al-Awsat that during this period between January and February, for the first time there is a center for investors services representatives from 60 parties concerned with issuing licenses. These parties represent the majority of entities which the investors needs to deal with.

Abbas points out that the investment law was enacted following consultation with relevant bodies and no party objected over the proposed duration. The law also suggests issuing a unified guide of steps that the investor needs.

According to the latest reports of the International Finance Corporation, the investor needs around 172 days to finish the construction licenses in Egypt in return for an average of 132.1 to finish the same licenses in MENA. Egypt comes in rank 66 among 190 states.

Ministry of Investment and International Cooperation looks forward to not repeat the problems of granting licenses for newly established projects. A source from the ministry told Asharq Al-Awsat that the authority allows a number of mechanisms to coordinate between the investor and the party issuing the licenses.



Oil Prices Steady as Markets Weigh Demand against US Inventories

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
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Oil Prices Steady as Markets Weigh Demand against US Inventories

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil prices were little changed on Thursday as investors weighed firm winter fuel demand expectations against large US fuel inventories and macroeconomic concerns.

Brent crude futures were down 3 cents at $76.13 a barrel by 1003 GMT. US West Texas Intermediate crude futures dipped 10 cents to $73.22.

Both benchmarks fell more than 1% on Wednesday as a stronger dollar and a bigger than expected rise in US fuel stockpiles pressured prices.

"The oil market is still grappling with opposite forces - seasonal demand to support the bulls and macro data that supports a stronger US dollar in the medium term ... that can put a ceiling to prevent the bulls from advancing further," said OANDA senior market analyst Kelvin Wong.

JPMorgan analysts expect oil demand for January to expand by 1.4 million barrels per day (bpd) year on year to 101.4 million bpd, primarily driven by increased use of heating fuels in the Northern Hemisphere.

"Global oil demand is expected to remain strong throughout January, fuelled by colder than normal winter conditions that are boosting heating fuel consumption, as well as an earlier onset of travel activities in China for the Lunar New Year holidays," the analysts said.

The market structure in Brent futures is also indicating that traders are becoming more concerned about supply tightening at the same time demand is increasing.

The premium of the front-month Brent contract over the six-month contract reached its widest since August on Wednesday. A widening of this backwardation, when futures for prompt delivery are higher than for later delivery, typically indicates that supply is declining or demand is increasing.

Nevertheless, official Energy Information Administration (EIA) data showed rising gasoline and distillates stockpiles in the United States last week.

The dollar strengthened further on Thursday, underpinned by rising Treasury yields ahead of US President-elect Donald Trump's entrance into the White House on Jan. 20.

Looking ahead, WTI crude oil is expected to oscillate within a range of $67.55 to $77.95 into February as the market awaits more clarity on Trump's administration policies and fresh fiscal stimulus measures out of China, OANDA's Wong said.