Cairo, Asharq Al-Awsat—In comments to Asharq Al-Awasat, a senior executive from the African Development Bank (AfDB) denied the development finance institution would be halting its loans to Egypt.
Reports have been circulating that the Ivory Coast-based AfDB would be pulling its funding from Egypt following the African Union’s decision to revoke the latter’s membership after the ouster of former President Mohamed Mursi last July.
Aly Abou-Sabaa, vice president of the AfDB’s Sector Operation for Governance, Agriculture and Human Development, told Asharq Al-Awsat the institution had no intention of pulling its current funding from Egypt and that it also planned to fund “four new projects” in the near future.
Abou-Sabaa did not specify how much the AfDB would be pumping into Egyptian projects in 2014, maintaining the exact details were still under discussion with the country’s interim government.
The AfDB is one of the institutions currently slated to finance a planned Saudi–Egyptian electricity grid project.
Inaugurated on June 1, 2013—a month before Mursi’s ouster—the joint electricity grid project between Saudi Arabia and Egypt will generate around 3,000 megawatts of power that will be shared between both countries via a 12-mile-long (20 kilometer) underwater cable.
Abou-Sabaa said: “The AfDB has shown interest in funding the . . . electricity grid project should the Egyptian government officially ask us to do so. So far the value of the required funding has not been determined but discussions with [Egypt’s] Ministry of Electricity are underway.”
Both Saudi Arabia and Egypt have promised to put up half of the funding for the 1.6 billion US dollar project. Egypt will use funds from excess loans allocated for electricity to cover part of its share, with the remainder due to come from the AfDB and the Arab Bank for Economic and Social Development, the World Bank and the European Investment Bank.
Saudi Arabia’s share will be entirely self-financed.
Since 1974, the AfDB has funded as many as 100 projects in Egypt amounting to 5.55 billion dollars. Those projects have ranged from infrastructure and energy to the social sector.
The development finance institution provides funding for projects aimed at improving social and economic conditions in African countries.
Cairo, Asharq Al-Awasat—In a move to help develop Egypt’s capital markets, the Egyptian Exchange (EGX) announced on Sunday the launch of a new index for the Nile Stock Exchange (Nilex), the country’s small and mid-cap stock market.
EGX Chairman Dr. Mohamed Omran said the move was made to fully activate the exchange, on which 24 small and medium sized companies currently trade, after it changed from using an auction to a regular trading system in November 2011, providing the necessary tools to measure its performance and to increase its competitiveness in response to rising investor appetite. The exchange itself was launched in 2008.
The new index will follow the country’s benchmark EGX 30 index in adjusting market capitalization via a free float methodology, but will include only the most active companies, selected in terms of value, during the audit period.
It will also exclude any companies with a free float of less than 10 percent and those that have picked up more than three violations of disclosure rules, as well as any companies recording losses for a period of three consecutive years.
The new index will be counted retrospectively from July 2, 2012 at 1,000 points. It has since then grown 15.7 percent to reach 1,156.8 points by the end of 2013. The EGX 30 grew 37 percent during the same period.
The index was previously open for trading for one hour a day only, but the decision was taken in October 2013 to increase that to four. Omran said this has had a significant impact on the development of the index, which recorded growth levels of 18.3 percent from October 3, 2013, when the changes took effect, to December 31, 2013—just shy of the 18.9 percent recorded by the EGX 30 during the same period.
This comes as markets in Egypt were left reeling on Sunday, with the EGX 30 dropping 0.22 percent to reach 7,217.82 points, following a turbulent last few days that have seen four terrorist attacks hit Cairo and the country’s third anniversary of the January 25 revolution marred by violence, which left 49 dead after clashes between anti-government protesters and security forces.
The EGX lost 1.2 billion Egyptian pounds (172.6 US dollars) on Sunday following the events, canceling out a gain of 990 million pounds (142.4 million dollars) last week, which came close on the heels of the country’s referendum being approved earlier this month.
Cairo, Asharq Al-Awsat—Amid a heightened security atmosphere across the country on Tuesday, Egyptians began voting in a referendum over amendments to the country’s 2012 constitution, in a process set to last until Wednesday evening.
More than 50 million voters are expected to line up at 3,367 polling stations for a vote that is seen as the first major step in the military-backed political roadmap for the country that was implemented following the ouster of former President Mohamed Mursi last July.
Hisham Mokhtar, a member of the Supreme Committee for Elections, a body set up in September by interim President Adly Mansour to oversee the amendments to the constitution and the subsequent referendum, told Asharq Al-Awsat that “voting will begin at 9am and end on 9pm on the first day, and will extend on the second day until the last voter” has cast their ballot.
According to the Egyptian military, a total of 160,000 troops have been deployed to provide security, with tensions mounting as the vote gets underway following a spate of recent bombings in the country, which the interim government has blamed on the Muslim Brotherhood.
Speaking to Asharq Al-Awsat, an official in the country’s Finance Ministry said that the costs of overseeing the referendum are set to rise 1.2 billion Egyptian pounds (173 million US dollars) over the referendum on the 2012 constitution, mainly as a result of the beefed up security measures taken this time.
Shortly before polls opened at 9am, an explosive device went off outside a courthouse in the working-class Cairo neighborhood of Imababa. The explosion damaged the front of the building, shattering windows in nearby buildings. No casualties or fatalities have been reported.
With the referendum crucial in ratifying the mandates of both the military and the interim government, both are relying heavily on a “yes” vote and a high turnout to give backing to their decision to depose Mursi in July and the subsequent arrests of leadership figures from his group, the Muslim Brotherhood, as well as the ban placed on the group and its designation as a terrorist organization in December.
The Brotherhood has called for a boycott of the vote.
Interim President Adly Mansour, addressing himself to Egyptians after casting his own ballot this morning, said: “You must come out and vote to prove to those behind the dark terrorism that you are not afraid.”
Egyptians will be casting a “yes” or a “no” vote on the amendments made to the constitution put forward by forward President Mohamed Mursi in 2012, the country’s sixth nationwide vote since former President Hosni Mubarak was ousted following the 2011 revolution.
Changes to the 2012 constitution include provisions that the appointment of country’s defense minister—a post currently held by the widely popular Gen. Abdel-Fattah El-Sissi—be approved by the Supreme Council of the Armed Forces (SCAF), for the first eight years after the constitution is ratified. It also places the responsibility of appointing the country’s prosecutor-general with the Supreme Judicial Council, whereas Mursi’s 2012 constitution gave that responsibility to the president. The new constitution also imposes a ban on any political parties “formed on the basis of religion.” The second article of the 2012 constitution, pertaining to the principles of Islamic Shari’a law being the main source of legislation, has also been retained, but an additional article seeking to define those principles—at the time seen as a possible way to use a more stringent form of Shari’a law more palatable to the Brotherhood and its conservative Salafist allies—has been removed.
Egyptians living abroad cast their votes on the referendum last week, with voting in absentia closing on Sunday.
The reaction to the vote has been highly polarized, with supporters of ousted President Mursi pointing to what they believed was a low turnout, with only 15 percent of those eligible to vote actually doing so.
The Supreme Committee for Elections, however, has said that the vote had drawn some 104,000 voters abroad, compared to the 93,000 voters who cast their ballots on the 2012 constitution put forward by Mursi.
Speaking at a State Information Service press conference, Mokhtar said counting of the domestic vote would begin immediately after voting has closed on Wednesday. He expected the results to be announced within 72 hours after voting ends.
The Supreme Committee for Elections said in a statement that the vote will be monitored by 67 domestic human rights organizations, represented by a total of 83,467 individuals.
The Board of Directors of the Egyptian Judges’ Club, a professional organization for members of the country’s judiciary, has also announced that it will be monitoring the vote.
International observers from the European Union and the UK-based anti-corruption organization Transparency International have been arriving in Cairo to monitor the referendum and ensure voting transparency.
Gen. Abdel-Fattah El-Sissi has announced that the military has made available 1,000 planes to transport judges to their judicial committees set up to monitor the voting in rural and remote areas with poor transport infrastructure.
Cairo, Asharq Al-Awsat—The Central Bank of Egypt has eased restrictions on foreign currency transfers abroad, allowing individuals to make a one-time transfer of up to 100,000 US dollars this calendar year.
In a letter circulated to Egyptian banks on Monday and posted on its website on Tuesday, central bank Governor Hisham Ramez asked the country’s banks to implement the new decision from the beginning of January 2014.
Previous restrictions effective since February 2011 allowed individuals to make one transfer of 100,000 US dollars, for the entire three-year period since the uprising that toppled former President Hosni Mubarak.
Under the new regulations, the one-time transfer can be made during 2014.
The central bank did not state if further transfers could be made after year’s end, though the country’s interim deputy prime minister, Ziad Bahaa El-Din, had stated in previous comments to the press that Egypt was looking to ease capital controls significantly.
Since the January 25 revolution in 2011, The central bank has set the limit on foreign currency transfers to stem the flow of foreign cash out of the country. Egypt’s foreign currency reserves plunged steadily from 36 billion US dollars at the end of 2010 to 13.424 US dollars in March 2013, an amount barely enough to cover three months of exports.
Speaking to Asharq Al-Awsat, the general director of the Misr Iran Development Bank (MIDB) Hamdi Musa said the move would be a “lifeline” for individuals who had been affected negatively by the previous restrictions.
“Some Egyptians with dollar-denominated bank accounts who had investments abroad had to finance payments through instalments in light of the restrictions, as a result of not being able to make large one-time payments abroad,” he said.
He added that the new move would facilitate transactions in light of “the recent improvements in Egypt’s economy.”
Following former President Mohamed Mursi’s ouster in July, Egypt has received 12 billion US dollars in aid from several Gulf countries, including Kuwait and Saudi Arabia.
Such aid has helped stabilize the country’s economy during the interim period, but many analysts predict the government must enact substantive reforms in order to ensure stability in the long run.
Many international investors pulled out after the February 2011 overthrow of former President Hosni Mubarak, as the political instability widened Egypt’s balance of payments and budget.
“In the aftermath of the January 25 revolution, there were huge demands for hard currency in Egypt for the purpose of transferring funds abroad, some of which were done legally and others illegally,” said Musa.
But Musa said that now “all indications are positive for the economy” and that “foreign investors are returning.”
“The dollar is now flooding the market again—whether legally or through the black market—and that the central bank is now fulfilling 60–70 percent of all US dollar requests from local banks,” he said.
In a December Reuters survey of leading Middle East-based fund managers, almost half of those polled expected to raise their equity allocations to Egypt in the next three months, with none planning to reduce exposure.
The survey showed funds were not worried about a deterioration in public security despite recent attacks in the country, and were instead buoyed by news of the billions of dollars of aid from the Gulf that was allowing the government to assemble large economic stimulus packages.
Cairo, Asharq Al-Awsat—The European Union and the German-sponsored Participatory Development Program in Urban Areas (PDP) agreed a five-year developmental program worth 20 million euros to help improve the living conditions of Egyptian citizens living in so-called “informal areas.”
In a press conference held on Thursday, James Moran, the European Union Ambassador to Egypt, announced that the EU will allocate 20 million euros for the program to improve five main informal areas in Egypt, including Matariya in Cairo, Old Boulaq in Giza and Qalyub, Shubra, and Khosoos in Qalyubeya.
The PDP describes “informal areas” as residential areas that have developed “in absence of government planning processes,” adding, “In some cases, buildings and neighborhoods are built illegally on agricultural land that is not officially assigned for housing and construction. Such ad hoc constructions often disregard government regulations concerning the size of allotments and standards of construction.”
“The [development] programme is in line with the Egyptian government’s policy to improve informal areas and to address unemployment with an emphasis on helping women and youth,” Moran said.
Moran pointed out that this program is part of a European Aid Program worth 90 million euros agreed between EU Foreign Relations chief Catherine Ashton and Egyptian Deputy Prime Minister Ziad Bahaa Eddin last November.
Moran also denied media reports that the EU has suspended some aid to Egypt following the ouster of Islamist president Mohamed Mursi, confirming the EU’s commitment to the North African republic.
The program, financed by the EU and the German government, is part of the PDP that has been operating in Egypt since 2004. The PDP aims to improve the “living conditions of the poor population residing in informal areas by offering better quality services via public administration and civil society organizations in order to satisfy the needs of the residents and to improve the environmental conditions in these informal areas,” according to the Program’s official webpage.
Nihal El-Megharbel, an economic adviser at the Egyptian Ministry of Planning, stressed the importance of this developmental program and said that it represents a first step to transforming not only Cairo’s five main informal areas, but also those across Egypt.
Cairo, Asharq Al-Awsat—Speaking to Asharq Al-Awsat from his office in Cairo, Egyptian finance minister Ahmed Galal gave his take on the state of the Egyptian economy and government plans to reduce the budget deficit and enact a growth-based economic policy.
Galal is a noted economist, having held numerous senior positions at international economic bodies, including the World Bank. Galal was the managing director of the Economic Research Forum, a leading regional research institution, when he was offered the job of finance minister in the interim government headed by Prime Minister Hazem El-Beblawi . His tenure has seen a huge influx of foreign funds into Egypt, particularly from the Arab Gulf.
In exclusive comments to Asharq Al-Awsat, Galal outlined his economic and institutional reform project, which is seeking to restart Egypt’s stalled economy.
Asharq Al-Awsat: What’s your assessment of the economic situation in Egypt?
Ahmed Galal: Egypt’s economy is suffering from three fundamental problems. The first problem is that of imbalance, namely a deficit-to-GDP ratio of 14 percent, a significant decrease in foreign currency reserves to the point that they could only cover national imports for three months, and so the Egyptian pound was devalued against the US dollar. This resulted in the development of a parallel market for the local currency, along with increased interest rates on public debt, resulting in Egypt’s foreign and domestic debts standing at 90 percent of GDP.
The second problem was represented by a slowdown in economic growth, which last fiscal year fell to just 2.2 percent. This is a very low rate, and means that job creation rates will also be limited, particularly if you take into account that there are 700,000 to 800,000 new people entering the job market every year.
The third problem—and this is the fundamental problem—was the general sense that there was no social justice, which was a correct sense. By social justice, I mean that the distribution of income and wealth across society was getting worse [i.e., more unequal] with the passage of time.
The current government is confronting these problems and trying to help Egypt get out of this quagmire. We are not just trying to resolve these problems in the short term, but are striving to pave the way for economic growth and recovery.
Q: What are your plans to secure this recovery?
Over the past year, the proposed solution was a loan from the International Monetary Fund (IMF) along with some reforms to reduce the budget deficit, in addition to using sukuk [Islamic bonds] as a means to attract investment. That was the vision.
However, when we entered the government, we saw that the solution lies in changing our economic policies from a deflationary approach to one based on expansion [i.e., a countercyclical policy]. This policy requires funds from abroad, whether through the return of tourism, foreign investment or grants and loans. These are the alternatives on offer for an economy that is operating below capacity and requires a shot to the arm to push it forward.
The dilemma was how to follow this approach without upsetting the overall balance. The basic problem was regarding the lack of financing from abroad, and that was resolved with the support the Gulf States have offered us. This assistance has granted us the ability to take a breather and follow this growth-based approach while seeking to achieve financial balance and social justice.
We included all of this in the first phase of our reform program, including an additional EGP 60 billion being added to the state budget. A large part of this additional appropriation is being invested on infrastructure, which will increase employment and serve the development process during the forthcoming stage.
Q: How do you think these policies will affect Egypt’s future economic outlook? Will the next Egyptian government require foreign financial assistance, whether from the IMF or other Arab states?
The government is working on two tracks. First, we are working to deal with the most pressing problems, because these cannot wait. However, on the second track, we are working to put in place a range of economic and institutional reforms that will serve future governments. One of the problems we have responded to is guaranteeing the future supply of commodities and gasoline. We have also responded to urgent public demands, such as those calling for a minimum wage and increasing pensions. At the same time, we have enacted a property tax law, and we are trying to move towards a value-added tax system. These issues will be important to any future government, and the next government will also reap the fruits of the policies being followed by the current government.
Q: There are reports that the government considering introducing progressive taxation and its consequent tax increases for high earners. Can you confirm this?
This is inaccurate—these are rumors. A tax on affluence is not in our plans, particularly as any such tax would be difficult to implement. We are following a growth-based approach, and we cannot do that while enacting new taxes. This does not mean that we oppose progressive taxation on income, nor do we oppose a review of income tax, but it is important that any such tax is imposed at the right time. Now is not the right time.
Q: The minimum wage rise is set to come into force in January. Will it be enough solve the Egyptian wage crisis?
There are a number of reasons behind the wage imbalance, and they will remain with us and with Egypt’s future governments. Egypt’s salary structure is very complex—not just in the government sector, but also the private sector. The employment market and salary structure require a fundamental review.
The minimum wage is a popular issue and an important issue, but it is not the only issue—and it may not even be the most important issue in terms of social justice.
Q: Are there any other plans to stimulate the economy?
What I can confirm at this point is that the most recent budget appropriation will not be the last. There has been a shift in resources and obligations in terms of expenses that have been added, but which were not taken into account in the additional allocation to the budget.
Q: Egyptian officials have said that this additional allocation may be somewhere in the region of USD 3.2 billion. Is this true?
We have yet to announce a definite figure. The Ministry of Finance is studying this issue with the Ministry of Planning. These discussions are ongoing, and all I can confirm at this point is that there will be an additional allocation to the budget.
Q: The United Arab Emirates in particular is seeking to develop a number of projects in Egypt, and these plans were cited in the stimulus plan announced by your ministry. To what extent will such assistance affect Egypt’s stimulus plan?
All of the projects that were supposed to be financed by the government and which are now receiving foreign financing will help develop Egypt’s economy. We thank the UAE and others for their assistance in financing projects in Egypt.
Q: In addition to the UAE, what other countries are injecting funds into Egypt?
The Emirati [financing] model can be viewed as a model to emulate, and it is helping us in our discussions with Saudi Arabia and Kuwait. The Egyptian Minister of International Cooperation, Dr. Ziad Bahaa El Din, is set to begin new round of talks with Saudi Arabia and Kuwait.
Q: How do you intend to contend with Egypt’s budget deficit?
The budget deficit will be reduced to 10 percent, and I am committed to this pledge. I have not plucked this number out of the air—it is based on hard figures. For example, all of our spending is offset, and so we are taking our budget deficit into account. We do not spend money unless it has been allocated, and if we find an issue that requires spending money, we look for ways to finance that expenditure that do not increase the deficit.
A large part of the additional funds we received from the Gulf States were grants, but another important thing is the indirect benefits that we have obtained from this assistance. It has increased Egypt’s currency reserves, and the central bank has cut interest rates, allowing borrowing at a rate of 10.5 percent, rather than 14.5 percent.
Q: Is there any intention to reduce subsidies?
One of the important things that we are trying to begin with is the rationalization of energy subsidies. We do not want to move closer to supporting material supplies, because we are talking about EGP 30 billion in food subsidies, and EGP 130 billion in gas subsidies. When time is of the essence, you must focus on the thing that will have the greatest return—in this case, energy subsidies.
Cairo, Asharq Al-Awsat—The Egyptian government announced the launch of the first integrated industrial map for industrial investment on Tuesday.
The government claims that the map will provide complete data of all lands utilized for industrial production, and identify areas rich with minerals and natural resources as well as proposed industrial zones for investment.
The Minister of Trade and Industry of Egypt, Mounir Fakhri Abdel Nour, said during a meeting with journalists on Tuesday that the new map is designed to encourage investment and to make the most of important investment opportunities.
He added that it facilitates new investments since it includes the data that usually takes up 50 per cent of the time required for making an investment decision to process. This includes information on regulations, laws, and procedures for both the state and investors in order to begin the implementation process as soon as possible.
Nour said that the new map will contribute to the creation of 3000 plants and 22 specialized industrial complexes for small and medium enterprises over a course of five years. It is expected to bring about investments of almost EGP 35 billion (approximately USD 5 billion) and provide about 1.5 million jobs.
The current rates of investment present a challenge to the Egyptian government. During the first 9 months of the last fiscal year, the rate of contribution of investments in growth rates was negative, at -0.7 percent.
This is blamed for the low growth rate during that period which reached about 2.3 per cent. Consumption rates still play the greatest role in the economy, with their contributions amounting to almost 22.85 percent.
The Egyptian government said it expects to boost government investment, particularly to about EGP 290 billion (USD 41.4 billion) during the current fiscal year. In addition to this, an approved stimulus package of almost EGP 22.3 billion (USD 3.18 billion) will be applied to several areas of investment, and will also include payments to contractors.
Abdel Nour identified a number of different sectors that will be included in the new map for the establishment of investments. These include food processing, building materials, mining, engineering, electronics, chemicals and petrochemicals, fertilizers, textiles and garments, and cultural and creative industries.
He also pointed out that the new map targets expanding projects aimed to increase the added value of industrial products and developing logistics associated with various industries. He also added that it will include the improvement of roads and ports and expansion in the field of renewable energy and industrial waste recycling.
Abdel Nour claimed that the map will act as a geographical, legislative, and procedural guide. It will clarify the places allocated for different kinds of projects and industrial investments to the domestic and foreign investors.
Nour also claimed that the map will aim to point out ideal locations for projects in order to shorten the time and reduce the cost of investments and to aid them with the care and supervision required in order to accelerate production, distribution, and diversification and take advantage of the existing benefits of each region.
Cairo, Asharq Al-Awsat–The Egyptian stock exchange fell yesterday following fears caused by the ongoing unrest, taking the index to its lowest level since mid-June. Sales by foreign investors yesterday were the cause of the decline, causing the market to lose around USD 1 billion.
The EGX30 index fell by 3.8 percent to reach 5334.55 points, while the medium-sized companies index fell by 1.85 percent to close at 421.07.
Foreign investors sold around USD 10 million more than their purchases, equaling 17.73 percent of total sales, while purchases by Egyptians and Arabs were around USD 9 million more than their sales.
Analysts said this drop was expected in light of the escalating violence in the country, which reminded investors of the January 2011 revolution.
Egyptian Stock Exchange traded for three hours yesterday, the first day it has opened following the suspension of trading on Thursday. This followed a decision by the Central Bank of Egypt to also open for only three hours on Sunday and Monday.
The exchange’s management said it was in contact with all listed companies to monitor the effects of recent events on Egyptian businesses, stressing the importance of revealing any such developments quickly. It also said that it would try to avoid taking such precautionary measures except when strictly necessary, in order to prevent disruptions in the economy.
So far, no listed company has announced any losses caused by the unrest in the country.
Many factories suspended work last week, the largest of which was the Swedish home appliances manufacturer Electrolux. However, those factories announced that they had no intention of leaving Egypt, but were simply taking precautions in light of the security situation in the country.
Egypt declared a one-month state of emergency last Wednesday, imposing a curfew between 7 p.m. and 6 a.m. local time in 14 governorates.
The week of heightened unrest has affected the general economic situation in Egypt, with production in factories slowing due to difficulties in transporting workers and raw material on roads disrupted by protests.
Egyptian trade and industry minister Mounir Fakhry Abdel Nour said he had called for a meeting with the General Federation of Egyptian Chambers of Commerce to discuss the negative effects of what he called “terrorist activities” on trade and the possibility of supporting installations damaged by such activities.
The minister added that the recent unrest had directly affected shops, many of which were forced to close and some of which were also damaged, especially in areas affected by violence.
The minister said yesterday that an agreement was reached with the prime minister to authorize the General Federation of Egyptian Chambers of Commerce and the Egyptian Industry Union, in addition to the chambers of commerce in the governorates, to process applications for special permits for goods transport vehicles and buses carrying workers to be allowed to travel to and from industrial areas during the curfew hours.
The curfew has made it difficult for many workers to reach factories for evening shifts, which has negatively affected production levels, thus making it difficult for the factories to meet the needs of the local market and fulfill export contracts.
In a related development, the Egyptian government’s cost of borrowing rose Sunday as the yield on government debt instruments rose for the first time in seven weeks, following a fall due to increased demand last month.
Egypt sold USD 8.6 billion pounds of treasury bills at auction yesterday, with three-month notes rising 18 basis points on last week to 11.44 percent, according to the central bank.
Cairo, Asharq Al-Awsat—Hamdi Samir, adviser to the minister of finance for public debt affairs has said the plan to issue Egyptian bonds in favor of Qatar has been temporarily postponed due to the unrest in the country, adding that only the date of the issue will change.
Soon after the ouster of Mubarak, Qatar offered Egypt USD 8 billion, including USD 1 billion as a grant, and another USD 5.5 billion as a deposit in the Central Bank to be used to pay for the treasury bonds for Qatar.
Samir told Asharq Al-Awsat that Egypt was going ahead with converting Qatari deposits into bonds according to a previous agreement between both sides. He denied any inflexibility on the part of the Qatari officials and added that “communications are ongoing and have not been disrupted, and we have no issues at all.”
The Egyptian government offered USD 3.5 billion in bonds from the Qatari financial package to the Qatar National Bank, of which USD 2.5 billion was offered in May at an annual interest rate of 4.25 percent, and USD 1 billion in early July at an annual interest rate of 3.5 percent.
Samir said the postponement was due to the fact that “it was planned for Egypt to offer bonds to the Qatari government in two installments, one in August, and a second in September, for the value of USD 1 billion. Each issue needs one month of preparation before it is completed, where the August issue for instance, would need to be worked on from the start of July, because of too many administrative and legal issues. After the June 30 revolution, we will not be able to make the preparations for this issue, due to the circumstances in the country.”
Since the ouster of Mohamed Mursi, Saudi Arabia, UAE and Kuwait announced financial aid packages worth USD 12 billion for Egypt. The Egyptian Central Bank received USD 5 billion last month, and the aid packages helped improve the Egyptian economic outlook. Credit rating institutions did not reduce Egypt’s rating due a stable future outlook, and demand increased, especially among foreigners, for government bonds and treasury bills, while their yield dropped.
Samir expects the yield to remain unchanged on the international bonds offered by Egypt to Qatar on the international market. He said world markets were different to the local market, especially regarding the risks surrounding Egyptian economy. He added: “I expect the yield on the next bonds to be the same as the last issue, which was 3.5 percent.”
The Egyptian government is hoping to introduce some economic reforms. However, the government, which took the oath in the middle of July, has yet to announce its economic plan.
Egypt has experienced an increasing budget deficit in the first 11 months of the current financial year, reaching USD 29 billion, representing 11 percent of GDP, due to the large increase in spending. The national debt has reached unprecedented levels, with the figure for foreign debt last March reaching USD 38 billion, representing 12.9 percent of GDP.
Cairo, Asharq Al-Awsat—Egypt’s Minister of electricity Ahmad Emam said on Wednesday that Egypt was planning to solicit bids for new power plants from private sector investors.
He added that his ministry aimed at 6,250 MW of capacity to the national electricity grid under the existing Build, Own, Operate (BOO) scheme, as part of the government’s five-year plan. Emam said the project will take 24 to 30 months to complete.
Emam said these figures were represented in part by 2,250 MW from the Beni Suef electricity generating station using the combined-cycle system, and 200 MW from solar power, using photo-voltaic cells, by establishing 10 solar stations each producing 20 MW. Initial discussions on the projects are scheduled to begin with experienced local and foreign investors, who will be expected to provide proof of their expertise, later this month.
Last May, the Ministry of Electricity released the terms-of-reference handbook for companies which had already qualified to build the Daryut power plant, with a capability of 2,250 MW using the combined-cycle system. Another terms-of-reference handbook was produced for the construction of an electricity power plant, with a capability of 250 MW, using wind energy, in the Gulf of Suez.
The minister said a tender will be issued for the construction of Qena steam power plant to produce 1,300 MW of electricity during the next month. He added that the applicants will need to design, fund, construct, own and operate the plant, and sell electricity power to the Egyptian Electric Holding Company for 25 years, under an electricity purchasing agreement.
The minister added that these plants were part of the seventh five-year plan, covering the years 2012–2017, which the electricity sector endeavors to implement within the framework of an increase in demand for electricity.
Over the last two years, Egypt has witnessed a constant stream of disruptions of its electricity supplies because of increased consumption and fuel shortages at power plants, which it is trying to compensate for by building new power plants and increasing the efficiency of existing plants.
In addition, it also hopes to reduce an existing deficit in the Egyptian electricity grid, which stands at between 2,000 and 2,500 MW, with electricity grid linkage projects with neighboring states.
The Egyptian government has signed a memorandum of understanding on electricity linkage with Saudi Arabia in June, in a project worth USD 1.6 billion. The Saudi minister of electricity, Abdulah Al-Hossein, said the capacity of the link between the two countries will be 3,000 MW, adding that “it will be a major axis of Arab electricity linkage . . .to establish an infrastructure for electricity trade between Arab countries, in preparation for the establishment of an Arab electricity market, and equip it to link to the European electricity system.”