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Middle East & African Monitor – 19 April 2017

  • US confirms Iran’s compliance with nuclear agreement but plans a review
  • Cash crunch at Venezuela’s national oil company
  • Production cuts will weigh on growth in some oil exporting countries – IMF
  • LIA appeals to UN over frozen assets
  • Tunisia’s CB to allow TND to weaken – receives US$1 Bio in aid
  • Morocco confirms plan to liberalize its FX regime
  • Foreign demand for Egyptian T-Bills remains strong
  • Zambia hopes to seal IMF deal

REGIONAL COMMENTARY

US confirms Iran’s compliance with nuclear agreement but plans a review
The US State Department confirmed yesterday, via its regular 3-monthly update to Congress, that Iran was continuing to comply with the conditions tied to the Nuclear agreement signed back in 2015. However the US Secretary of State, Rex Tillerson, also issued a statement saying that the National Security Council was preparing to review the original deal. "The Department of State certified to House Speaker Paul Ryan today that Iran is compliant through April 18th with its commitments under the Joint Comprehensive Plan of Action," Tillerson wrote but added that; “Notwithstanding, Iran remains a leading state sponsor of terror through many platforms and methods. President Trump has therefore directed a National Security Council-led interagency review of the ‘Joint Comprehensive Plan of Action’ that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States."

Cash crunch at Venezuela’s national oil company
As the economic and social crises in Venezuela continues to worsen, the country’s state-run oil company PDVSA, whose oil exports account for almost 90% of government revenues, is reportedly becoming increasingly short of cash. The situation has become so bad that a large number of its oil tankers have allegedly become unseaworthy and thus unable to leave port, due to the non-payment of servicing and maintenance contracts. A recent event which highlights how bad this crises has got is the decision by the Russian shipping company Sovcomflot, who seized a cargo of Venezuelan crude in the Caribbean due to unpaid shipping fees by PVDSA. Sovocomflot was providing around 15% of the ships that PDVSA chartered to deliver oil to its customers, because of the issues with its own fleet mentioned above. A sad state of affairs especially considering Venezuela is home to the world’s largest proven oil reserves.

Production cuts will weigh on growth in some oil exporting countries – IMF
The IMF has lowered its 2017 economic growth forecasts for a number of regional oil exporting countries including Saudi Arabia and the UAE. This adjustment is due primarily to the affected countries drop in crude output, which in turn is linked to the temporary production cut agreement signed at the end of last year. According to the IMF’s new estimates real GDP growth in the UAE will reach 1.50% this year but is set to expand again to 4.40% in 2018, meanwhile Saudi Arabia is expected to grow by just 0.40% in 2017 rising to 1.30% next year, while Kuwait’s economy is set to contract by 0.40% this year. These three countries are currently bearing the main weight of the oil production cuts.

LIA appeals to UN over frozen assets
An internationally recognised official of the Libyan Investment Authority, Ali Mahmoud, has appealed to the UN for permission to manage its large chunk of still frozen assets according to a recent article in the FT. “There are alternative opportunities that are being missed and in some cases there are deposits in banks that are past their maturity on which we are being charged negative interest rates. This has caused us big losses especially on the bonds and long-term investment portfolios,” Mahmoud was quoted as saying. The LIA’s assets have remained under UN sanctions since the overthrow of Gaddafi, whilst the ongoing divisions within the country means that a comprehensive agreement between all of Libya’s major political groupings, over who should control which particular government entity, is yet to be reached.

Tunisia’s CB to allow TND to weaken – receives US$1 Bio in aid
Tunisia is due to receive US$1 bio in financial aid from Qatar this week, of which 50% will be used to settle outstanding debt commitments and the rest placed on deposit at the Central Bank. The IMF has also agreed to release a previously delayed US$320 mio loan tranche to the government this month. Meanwhile Tunisia’s Finance Minister, Lamia Zribi, announced yesterday that the CB will begin reducing its intervention activity in the local currency market and allow the Dinar to weaken gradually, a decision taken in line with IMF recommendations. “The Central bank is going to minimise its interventions to reduce the value of the Dinar in a gradual way,” Zribi stated adding; “But we will avoid a brutal devaluation like that in Egypt.”

Morocco confirms plan to liberalize its FX regime
The governor of Morocco’s Central Bank, Abdellatif Jouahri, confirmed yesterday, that the authorities previously announced plans to liberalise the current exchange rate regime will begin in June this year. However this process is expected to be implemented on a very gradual basis and most expect the CB to begin by first widening the official ‘fluctuation’ band. "We will begin the first phase of liberalising the Dirham in the second quarter. I can't tell how long the duration of each phase will take, it depends on the market, " Jouahri was quoted as saying.

Foreign demand for Egyptian T-Bills remains strong
According to recent data released by Egypt’s Finance Ministry, offshore demand for Egyptian Treasury Bills has risen sharply since the currency was floated late last year. Foreigners were reported to be holding EGP 79 bio in local T-bills as at the beginning of this month, although yields continue to remain relatively high due to ongoing issuances. Meanwhile the Central Bank was quoted by Bloomberg yesterday saying that the country’s financial sector had attracted total inflows of US$19.2 bio since November 2016.

Zambia hopes to seal IMF deal
The Zambian government claimed this week that it was close to signing an agreement with the IMF over a potential US$1.2 -1.6 bio aid program. “At the moment we know that we can get up to $1.6 billion and if you ask me, I’d go for the maximum, hopefully the program can be presented to the board sometime end of June, beginning of July,” the country’s Finance Minister was quoted as saying.

19-04-2017

AND FINALLY…
Did you know that the version of hemorrhagic fever now called Ebola got its name from the Ebola River, a tributary of the Congo River?

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

Click here to download the article in PDF

NBAD Middle East & African Monitor – 19 March 2017

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