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Middle East & African Monitor – 11 July 2017

  • Arab States Say Released Documents Show Qatar Is In Breach Of Previous Accord.
  • Sharp Fall In Crude Production By Mature Conventional Fields.
  • Delay Of Morocco’s Currency Reform Program Is “Not A Problem” – IMF.
  • Saudi Arabia Plans Local Currency SUKUK Issuance.
  • IMF Set To Release Next Loan Installment To Egypt.
  • Etisalat Withdraws From Nigeria.
  • Sinoconst Wins Cement Plant Contract In Zambia.
  • Emirates Airlines Reduces Angola Flights Due To Repatriation Headache.

REGIONAL COMMENTARY

Arab States Say Released Documents Show Qatar Is In Breach Of Previous Accord.
The UAE, Bahrain, Saudi Arabia and Egypt issued a joint-statement yesterday in which they suggest that the previously secret documents published yesterday by CNN, and which relate to a 2013/14 accord signed by the governments of Riyadh and Doha, is further proof of how Qatar had later broken its agreement to abide by the terms of this accord. Their statement in full was published by the Saudi Press Agency and reads as follows; The four countries assert that the documents published by CNN, including the Riyadh Agreement (2013), its Executive Mechanism and the Riyadh Supplementary Agreement (2014), confirm beyond any doubt Qatar's failure to meet its commitments and its full violation of its pledges. The four states emphasize that the 13 demands submitted to the Qatari government were to fulfill their previous pledges and commitments and that the demands were originally stated in the Riyadh Agreement, its mechanism and the Supplementary Agreement and are fully in line with the spirit of what was agreed upon.” This latest news comes as the US Secretary of State is in the region until Friday this week in a fresh attempt at some shuttle diplomacy to help resolve the dispute. You can access more details on the 2013/14 accord mentioned above via this link : https://www.thenational.ae/world/gcc/revealed-the-secret-pledges-qatar-made-and-then-broke-1.484155

Sharp Fall In Crude Production By Mature Conventional Fields. 
According to a recent report released by the Rystad Energy Consultancy, low oil prices has caused output by mature conventional oil fields to drop at their fastest rate since 1992. The report claims that mature fields, which account for more than 33% of global supply, registered a 5.70% reduction in their output last year and forecasts another 6% decline this year. A partner at the firm was later quoted as saying in relation to the report that; “A lot of the focus is on OPEC and shale and not on the decline at these mature fields, where supply is struggling. We’re starting to see the long-term impact of lower oil prices,” Espen Erlingsen stated in a Bloomberg article. Meanwhile Russia’s Energy Minister, Alexander Novak, said yesterday that the current diplomatic crises surrounding Qatar does not threaten the OPEC output reduction agreement. "I had a meeting with the Qatari Energy Minister earlier today and we discussed the situation on the market and our relations. He stressed once again his country's commitment to all the obligations the signatories took up in terms of reducing the output of crude," Novak claimed.

Delay Of Morocco’s Currency Reform Program Is “Not A Problem” – IMF.
The head of the IMF’s mission in Morocco has discounted any potential negative risks arising from the Moroccan government’s recent decision to postpone the implementation of a currency reform program that had been due to begin last month. "Morocco has been ready, as we've already said. It's a sovereign and voluntary decision the Moroccan authorities have taken as part of a long process of integrating the country into the world economy, we don't see any big exposure to risk, we've done stress tests in the financial sector and we've seen the resistance of the Moroccan economy to external shocks," Nicolas Blancher said, adding that there was "no fundamental reason for the Dirham to depreciate," and that postponing the program "by a few days, or weeks, is not a problem."

Saudi Arabia Plans Local Currency SUKUK Issuance.
Saudi Arabia’s Finance Minister said during an interview at the G-20 summit in Germany last week that the Kingdom was preparing to issue a SAR denominated Islamic bond later this month. No details on the possible size or tenor of this issue has yet been released.

IMF Set To Release Next Loan Installment To Egypt.
Egypt’s Finance Minister, Amr El Garhy, said his country is due to receive the second US$1.25 bio loan tranche from the IMF within the next week. Meanwhile for the second time in a row and one that surprised many including ourselves, the Egyptian Central Bank hiked its benchmark interest rates by 200 bp last week. This decision was probably prompted by the IMF’s call for the country to lower inflation quickly so that it can proceed with its sensitive social and economic reform program, but we wonder if this latest hike may be just a tad too aggressive. The O/N deposit and lending rates ae now 18.75% and 19.75% respectively.

Etisalat Withdraws From Nigeria.
According to the CEO of Etisalat International, Hatem Dowidar, the UAE based telecoms giant has ended its management and technical support agreement with its Nigerian subsidiary EMTS, and will begin phasing out the Eitsalat brand in the West African country over a three-week period. "Despite the fundamentals to support growth and increase mobile penetration, Nigeria's macroeconomic conditions, steep currency devaluation and market challenges have had a detrimental impact preventing 'EMTS' continuing its ambitious growth plan," Dowidar was quoted as saying by the Khaleej Times newspaper, adding that the Etisalat Group was not affected by the decision and that the rating agencies had re-affirmed Etisalat Group high credit ratings. "One of the key reasons for 'EMTS' failure of the loan which was disbursed in part in US dollars is the worsening of Nigeria's exchange rate position, floating of the currency following the devaluation of the Naira and the closing of the possibilities for converting US dollars debt into Nigerian Naira debt by the monetary authorities. Etisalat Group has taken a difficult decision to exit the Nigerian Market to protect the wider interests of the Group and those of its shareholders," Dowidar concluded.

Sinoconst Wins Cement Plant Contract In Zambia.
A joint-venture between China’s Sinoconst and Zambia’s Consolidated Copper Mines Investment Holdings has been awarded the contract to build a US$500 mio cement plant in the sub-Saharan nation. Once complete the plant will have a projected daily output of 5,000 tonnes of cement and have two 20 MW coal fired power plants providing electricity to the facility.

Emirates Airlines Reduces Angola Flights Due To Repatriation Headache.
The UAE’s Emirates Airlines has announced that it will reduce the number of its weekly flights to Luanda from five to three due to difficulties in repatriating its revenues there back into hard currency. According to Reuters the airline’s CEO, Tim Clark, sent a letter to Angola’s transport ministry this past Sunday which stated; "As I have previously indicated, the viability of our operations in Luanda is being severely impacted by limitations on the repatriation of out sale proceeds being accumulated in Angola on a daily basis." Last month the Angolan Central Bank said it was not currently considering devaluing the local currency or amending its current FX regime despite an ongoing and acute shortage of hard currency.       

11-7-2017

AND FINALLY…
“Ask the experienced rather than the learned” – Arabic Proverb.

Glenn Wepener, Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
MarketInsights&Strategy@nbad.com
Tel: +971 2 6110 127

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