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Middle East & African Monitor – 29 March 2017

  • Libya’s oil production disrupted again
  • Saudi Arabia reduces Aramco’s tax burden ahead of IPO
  • Foreign tourists beginning to return to Egypt
  • Lebanon may see 1st budget approval in over a decade
  • Qatar plans GBP 5 Bio investment in the UK
  • Petrofac wins US$1.3 bio Kuwait contract
  • Colombia eyes SUKUK market
  • Barclays in talks over its Zimbabwe operations
  • Ghana cuts rates by 2%

REGIONAL COMMENTARY

Libya’s oil production disrupted again
Crude production from two of Libya’s largest fields has been disrupted again after armed groups blocked pipelines linking the fields to the Zawiya oil terminal. This latest event has caused overall production to fall by 252,000 bpd, and a tanker that was due to take 600,000 barrels onboard from Zawiya this week has been cancelled. Meanwhile Mustafa Sanalla, the chairman of the country’s National Oil Company has rejected a proposal by the Tripoli based administration to remove him from his additional role of oil minister, and split the authority of the oil ministry between the Prime Minister’s office and the NOC. "I have asked the Presidency Council to withdraw its recent resolution, as it has exceeded its authority," Sanalla stated adding; “The NOC has long supported the establishment of a genuine government of national accord able to speak for all Libyans. Until we have a political settlement, our duty is to administer the country's oil resources in trust for benefit of the nation.”

Saudi Arabia reduces Aramco’s tax burden ahead of IPO
Saudi Arabia sidelined the pessimists yet again this week by deciding to slash its corporate tax rate on the state owned oil firm Saudi Aramco from 85% to 50%. This move will make the companies’ eagerly awaited IPO more attractive to foreign investors as it means there will be more revenue available for the payment of future dividends. While the tax cut does mean there could be less income heading directly into the government’s coffers this will be mostly covered by the state’s share of future dividends as well as profit from other investments. Saudi Arabia plans to sell up to 5% of Aramco next year, and will list its shares locally and on at least one other overseas exchange.

Foreign tourists beginning to return to Egypt
One of the UK largest tour companies, Thomas Cook, has reported an increase in the number of holidaymakers looking to visit Egypt. As such the company has planned for number of flights to Sharm El Sheikh later this year as hopes also rise that a UK flight ban on the North African country will be lifted in May. This interest has been echoed in Germany where the research firm GfK reported a 91% jump in the number of German holidaymakers booking trips to Egypt. Tourism is an extremely important part of the Egyptian economy contributing 11% towards the country’s GDP and employing more than 10% of its workforce.

Lebanon may see 1st budget approval in over a decade
Prime Minister Hariri’s cabinet has approved Lebanon’s state budget for this year, although it still needs to pass through parliament where MPs have not approved such legislation since 2005 due to continued political spats. This time however, following the election of a new President last October, there are growing hopes that it will be passed despite some alleged disagreement over certain tax provisions. Although the draft has not yet been officially released, local media reports suggest that spending has been set at US$15.8 billion and estimates are for a deficit of US$5.2 bio. The World Bank says its expects Lebanon’s debt-to-GDP ratio to reach 157% in 2017.

Qatar plans GBP 5 Bio investment in the UK
A high profile trade delegation from Qatar announced this week that their country was looking to invest a further GBP 5 bio within the UK’s energy, infrastructure and property sectors. “Currently the UK is our first investment destination and it is the largest investment destination for Qatari investors, both public and private. We have more than GBP35-40 bio of investments already in the UK, and we’re announcing an additional GBP 5 bio of investment in the next three to five years. The way we look at our investment in any market, and especially in the UK, it is a very long-term investment, so we don’t look at any cycles up or down. So if you are talking about Brexit, I can go back to the financial crisis and tell you the same stories.” Qatar’s Finance Minister, Ali Shareef al Emadi stated.

Petrofac wins US$1.3 bio Kuwait contract
Colombia has reportedly undertaken a ‘non-deal’ roadshow in order to test investors’ appetite for a potential debut Islamic bond issue by the South American country. Colombia which is currently rated at BBB by FITCH, is seeking to raise US$500 mio in external financing this year.

Colombia eyes SUKUK market
UK based Petrofac has been awarded a US$1.3 bio EPC contract in Kuwait. Petrofac will be responsible for developing a gathering centre to process crude oil and gas recovered from the Burgan fields.

Barclays in talks over its Zimbabwe operations
Barclays is reportedly in talks with Malawi’s First Merchant Bank over the potential sale of the UK banking group’s 68% stake in Barclays Bank of Zimbabwe.

Ghana cuts rates by 2%
The Central Bank of Ghana’s decision to lower its benchmark rate by 200bp to 23.50% this week was a deeper cut than most had anticipated. A statement issued by the bank’s governor, Nashiru Issahaku, following the decision read; “The Monetary Policy Committee noted that underlying inflation pressures have eased considerably and inflation is projected to trend downwards toward the medium term target. There are indications that growth is likely to remain significantly below potential which, alongside an improved inflation outlook, provides some scope for monetary policy easing.” The actual impact of the cut may not be that significant however as commercial bank rates are unlikely to be reduced for now, and local analysts suggest that the government must also urgently focus on reducing state expenditure.

29-03-2017

AND FINALLY…
Did you know although they are smaller and not as ancient, there are more pyramids in Sudan than in Egypt?

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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NBAD Middle East & African Monitor – 29 March 2017

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