Large Financial Buffers Seen Aiding Mega Qatar Infrastructure Projects
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IMF LOAN | Page 2 MASALA ISSUE | Page 4 It’s cheap Brics bank to food or ‘hell’ sell $500mn in Egypt rupee bond Sunday, October 16, 2016 Muharram 15, 1438 AH GLOBAL VALUE: Page 20 Kia Motors rises to GULF TIMES 69th in Interbrand’s 2016 Best Global BUSINESS Brands report Large fi nancial buff ers seen aiding mega Qatar infrastructure projects By Pratap John fi cation in Qatar and will continue to ing cuts, tightening liquidity conditions, expansion. BMI Research also expects Chief Business Reporter drive the country’s GDP growth over the and widespread investor uncertainty, the GCC countries to increasingly turn next decade. BMI said. to the external bond markets for fi nanc- That said, Auberty felt that growth From 2017, it expects a notable diver- ing, in order to rebalance defi cit cover- iven Qatar’s large fi nancial buff - rates would remain well below aver- gence in growth between these states, age away from foreign exchange reserves ers, main infrastructure projects age annual growth of 13% seen between with the UAE and Qatar outperforming, while easing the pressure on domestic Gin the country will carry on, a 2005 and 2014. while Saudi Arabia will be the laggard. banks. senior analyst has said. For Qatar, huge fi nancial reserves and Nearly two years after the start of the Saudi Arabia is reportedly seeking to “As such, we do not expect Qatar to still-strong revenues from the country’s collapse in global energy prices, the eco- borrow up to $8bn from international signifi cantly draw down on its reserves gas sector will ensure continued public nomic outlook for the six GCC econo- banks before the end of the year, and we or assets,” said Raphaele Auberty, Mena sector spending ahead of the FIFA World mies has clearly deteriorated. Corporate expect the country to rapidly emerge as Country Risk analyst at BMI Research. Cup in 2022. sectors across the region are facing a the preeminent debt issuer of the Mena “We do not believe that Qatar’s com- This, along with a temporary blip in much more challenging environment, region over the coming years. mitment vis-à-vis FIFA World Cup 2022 real hydrocarbon growth as phases one amid waning fi scal support to the econ- However, it said reliance on foreign are at risk, with projects fi nanced by an and two of the Barzan gas project are omy; rising fi nancing costs due to tight- debt will increase even as fi nancing con- increase in non-oil revenue –through fi nalised, will ensure that Qatar’s eco- ening liquidity conditions; higher fuel ditions across the region harden, on the the introduction of a value-added tax in nomic growth trajectory remains well and utility costs; and the new strains on back of a continued stream of down- 2018 and new fees on expatriates – and above that of other GCC states, BMI Re- consumers’ purchasing power. grades to the GCC countries credit pro- by debt issuance,” Auberty told Gulf search said. While BMI Research does not expect fi les from the major credit rating agen- Times. All six Gulf Cooperation Council any of the region’s economies to fall into cies, the Fed’s interest rate hikes, and These infrastructure-related projects, economies will record a sharp slowdown recession this year, growth will slow more modest support from local inves- he said, are crucial to economic diversi- this year and 2017, amid public spend- considerably after half a decade of rapid tors. Gulf Times 2 Sunday, October 16, 2016 BUSINESS It’s cheap food or ‘hell’ as Egypt awaits loan lifeline from IMF IMF says Egypt must still cut at Cairo-based investment bank Mul- cluding the IMF deal, Prime Minis- subsidies, address exchange rate; tiples Group. “The spike in infl ation is ter Sherif Ismail told Bloomberg on off icials worried reforms could fuel squeezing people like never before.” Thursday, without giving details. It’s unrest among poor Egypt’s infl ation rate has been 14% not there yet. Initial approval came or higher since June, levels unseen this in August but this month the fund’s Bloomberg decade. It’s partly driven by a collaps- chief, Christine Lagarde, pointedly Cairo ing currency: The dollar trades on the tied fi nal signoff to the exchange rate black market at a 75% premium to the and subsidy moves. offi cial rate. El-Shenety said that the Those may add to public dissat- hen talk-show host Amr IMF-backed measures could push in- isfaction with a government has al- Adib went on Egyptian TV fl ation above 20%. ready imposed a new value-added tax Wto beg food companies to And he said that possibility may be and raised electricity prices by almost cut prices, he sounded an apocalyp- spreading doubt among key actors in 50%. That’s where the push to lower tic note. “We must all stand together,” the Egyptian regime about the wisdom food prices comes in. Adib said. Otherwise, society falls of signing up with the IMF. “The se- The country’s biggest listed dairy apart, “hell breaks loose, the fi re will curity bodies of the state are probably and juice producer, Juhayna Food consume us all.” worried that the economic grievances Industries, cited “price surges that Egypt’s government keeps media on will merge with the political grievances Egyptians suff er from” as its motive a tight leash, so the message probably of certain groups and result in chaos,” for responding to Adib’s call with a had offi cial backing. And sure enough, El-Shenety said. 20% discount on one of its milk prod- two days later, a group of foodmakers El-Sisi hardly needs reminding how ucts. Cheese-maker Arabian Food In- announced price cuts on air. The prob- dangerous those grievances can be, dustries Co, known as Domty, gave the lem for President Abdel-Fattah El-Sisi and how real is the risk of chaos. The same reason for a similar cut on feta is that he’s under pressure to take ma- former army chief came to power in cheese. jor economic decisions that will have 2013 after massive protests against his The companies are trying to “evade exactly the opposite eff ect, pushing the Islamist predecessor. Just two years public pressure by cutting prices on cost of living sharply higher. before that, Egyptians toppled the certain basic products that don’t have The International Monetary Fund longtime ruler Hosni Mubarak, gath- a big impact on them,” said Radwa has spelled out what Egypt needs to ering in their millions in streets and El-Swaify, head of research at Pha- do to fi nalise a $12bn deal: Act on the squares across the nation to demand ros Holding. “They can’t aff ord to cut exchange rate and subsidies – code liberty, justice – and bread. A bakery worker rides a bicycle as he carries fresh bread on his head in Cairo (file). The Egyptian president has repeatedly prices across their portfolios.” So as words, economists and investors agree, The president has repeatedly in- instructed off icials to ensure that the poorest Egyptians aren’t aff ected by eff orts to trim budget deficits. Authorities have a palliative, the food-price campaign for devaluing the pound and removing structed offi cials to ensure that the been stockpiling key commodities, including fuel and sugar, to safeguard against possible price gouging. But discontent may have little impact. caps on fuel prices. El-Sisi’s govern- poorest Egyptians aren’t aff ected by remains widespread. Even if El-Sisi and Lagarde see ment presents the IMF loan as proof eff orts to trim budget defi cits. Author- things diff erently, the IMF program that Egypt’s open for business again, ities have been stockpiling key com- ed, 50, outside a government-owned The pound has been weakening on as a complement to its own lending. will probably get done. That’s because, after six years of turmoil. But anything modities, including fuel and sugar, to discount supermarket. She dismissed on the black market at an acceler- That’s been achieved, offi cials said with a population of more than 90mn, that adds to already-high infl ation safeguard against possible price goug- the eff ectiveness of eff orts like Adib’s ated pace in the past week, partly on Thursday: Egypt has the $6bn that the the country can’t be allowed to col- risks stirring yet more unrest. ing. But discontent remains wide- broadcast demand for cheaper food: expectations of an imminent devalu- fund required, with a third of it coming lapse into chaos, according to Raza “There is a general dissatisfaction spread. “These campaigns are a lie,” she said. ation. A rare public spat with Saudi from Saudi Arabia. The money is need- Agha, chief economist for the Middle with the economic performance of the “We are close to begging. our income “Prices keep going up and we don’t Arabia, which has been El-Sisi’s chief ed to bolster foreign reserves, which East and Africa at VTB Capital in Lon- government, a lot of promises have isn’t enough to complete the month know what to do.” fi nancier, raised doubts about the gov- are down by more than 40% from end- don. been made without bearing fruit,” said and we have to borrow to make ends But if the IMF-backed measures car- ernment’s ability to secure cash from 2010 levels. “Nobody wants Egypt to fail,” he Omar El-Shenety, managing director meet,” said housewife Fatma Moham- ry risks, so does delaying them.