The House of Representatives’ general assembly gave final approval today to two separate bills

Newsletter

19 Oct 2022

The House of Representatives’ general assembly gave final approval today to two separate bills. One that will see the establishment of the Supreme Council for Vehicle Manufacturing and a new EV finance fund in a bid to localize the automotive industry and another that will allow expat Egyptians to import cars and get customs and fees drawbacks. The Finance Ministry is expected to publish a detailed list of the customs and required FX deposit sizes for different car models within two weeks of the law being published. (Hapi Journal).

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) have decided to cut oil production. The plan affects Europe the most, augmenting its existent energy crisis. But does the wound go deeper than just hitting Europe to scratch global supply, eventually reaching Egypt?
Against the backdrop of a strengthening US dollar, global recession, and inflation, the US is not the only one suffering nevertheless. These impediments are having their toll on all markets around the world, sending crude prices above 92 USD per barrel. When it comes to Egypt, whether or not it will get affected by such a decision depends on the oil trade balance. If there is a surplus, we will not be affected. The general budget could also get affected as fossil fuel subsidies have been phasing out. Thus, we could see the Fuel Automatic Pricing Committee raising prices in its quarterly meeting.
Egypt reported a $2.1 billion oil trade surplus last year, coincided with a spike in oil and natural gas prices on the back of the war in Ukraine, according to balance of payments figures.
It is important to note that Egypt is a net importer of oil but exports natural gas. According to Egypt’s budget indicators in FY 2022/2023, oil supply did not keep pace with the recovery in demand, which pushed oil prices higher along with the disruption of Russian oil supplies. However, if global oil price rises to exceed the expected assumptions, which is set at 85 USD per barrel, this will lead to a deterioration in the net relationship with the treasury and, consequently, an increase in the total target deficit by more than 1 billion EGP for each increase of 1 USD per barrel over what is estimated in the budget.
Investors see 14% devaluation ahead of IMF agreement.
EGP could have another 14% to fall against the USD. The currency is currently changing hands at 19.73 EGP / USD, having lost around a quarter of its value this year – including March’s sudden devaluation. We believe that the EGP will settle at around 22 on average in the coming days on the back of the imminent agreement with the IMF on an assistance package backed by a reform program. (Bloomberg).
El-Sisi directs trade ministry to ease industrial investments procedures.
Egyptian President Abdel Fattah El-Sisi has directed the Ministry of Trade and Industry to facilitate the procedures related to industrial investments. El-Sisi also urged the ministry to constantly communicate with the business community to coordinate in facing challenges and offer solutions to resolve any obstacles in this matter. This move aims to support the national industrial sector and reinforce partnerships with the private sector. (Hapi Journal).
Egypt suffers food gap of 10 billion USD: Sewilam.
Egypt suffers a food gap of more than 10 billion USD as it exports 60% of food, Egyptian Minister of Water Resources and Irrigation Hani Sewilam said. The country is also suffering from water scarcity and is close to facing absolute water scarcity. The annual water deficit in Egypt stands at around 21 billion cubic meters. The cultivated lands represent only 3.50% of the country, with Egypt depending on the Nile River by 97%, he pointed out. The minister added that these challenges have pushed the ministry to set the National Plan for Water Resources 2037, which targets the rationalization of water, developing additional water resources, and improving the quality of water. (Hapi Journal).
Egypt, Finland’s Nokia consider potential cooperation opportunities in oil, natural gas sector.
Egyptian Ministry of Petroleum and Mineral Resources has mulled over potential cooperation opportunities with Finland’s Nokia Corporation in implementing the ministry’s digital transformation strategy in the mining, oil, and natural gas industries. This move would help accelerate the digital transformation process in the oil and gas sector by benefiting from the state-of-the-art solutions and technologies provided by Nokia. (Al Mal)
Standard Chartered provides 566.4 million USD facility for Saudi-Egyptian electricity interconnection project.
Standard Chartered Bank, in collaboration with Sumitomo Mitsui Banking Corporation, arranged a 566.4 million USD Islamic financing supported by Export Credit Agency for Saudi Electricity Company to facilitate the Saudi-Egyptian electricity interconnection project. The shariah-compliant facility is consistent with the Islamic provisions of commodity Murabaha. The electricity interconnection project is the first-of-its-kind high-voltage direct current (HVDC) interconnection in the Middle East and North Africa (MENA) region to link electricity grids. (Arab Finance).
The project will enable Saudi Arabia and Egypt to exchange up to 3,000 megawatts of power, and is expected to be completed by 2026.
Furthermore, the project will support the power flow in several directions, from Badr city in Egypt to Medina in Saudi Arabia via Tabuk city. It is noteworthy that Standard Chartered was among other financial institutions that provided 3 billion USD as part of the five-year syndicated loan, implying the bank’s commitment to supporting Saudi Arabia and Egypt and playing a key role in their economic development. (Arab Finance).
Orascom Construction locked in new projects worth 670 million USD in 3Q 2022,
bringing total new awards in the first nine months of the year to 3.1 billion USD. New projects in the Middle East made up 70% of total new awards in the quarter while the rest was accounted for by US projects, the statement reads. OC’s consolidated backlog stood at 6.1 billion USD as of the end of September. (Hapi Journal)
On the global front, EU proposes 40 billion EUR fund to face energy crisis.
The European Commission has presented new exceptional measures that allow members of the European Union (EU) to redirect up to €40 billion of unused funding from the 2014-2020 Cohesion Policy framework. The measures aim to help citizens and small- and medium-sized enterprises (SMEs) in the EU to face challenges resulting from the ongoing energy crisis and higher prices of natural gas. The budget for these measures could amount to 10% of the total cohesion policy funds for 2014-2020. As per the new measures, members of the EU can also apply 100% co-financing rates, under which the EU budget will fully cover the costs. (Economist).