Egypt’s Secure Election Sieve
Egypt’s February external bonds were again oversubscribed, with the 30-year yield falling below 8%, ahead of the end-March election where President Al-Sisi does not even face token opposition, since the lone eligible candidate Moussa is an ally refusing to debate as too much of a “challenge” to the incumbent. Along with jailing political opponents and activists before the contest, journalists have been rounded up as military officers take over large media swathes. The government has also tried to block websites and managed to close hundreds as “fake news and extremist.” It released footage of reported ant-terror raids in the Sinai in a bid for public support, but turnout could lag the less than half of voters who participated in 2014, when the then general got 97% of ballots. Since signing the IMF accord and floating the pound, foreign investors have poured into debt and equity with double-digit returns despite near 20% inflation and the 8.5% of GDP fiscal deficit after fuel, but not more sensitive food subsidy cuts. The recently inaugurated Zohar gas field in the Nile Delta should generate billions of dollars in revenue and cheap energy, and staunch donor Saudi Arabia in March inked a $10 billion deal for a border “megacity” and business zone called Neom Riyadh had previously unveiled at a big 2017 investor conference.
The Kingdom plans to refinance its own $10 billion sovereign loan from 2016 as the budget deficit will still be over $50 billion or 7.5% of GDP this year despite higher oil prices. The public debt cap is set at 30% of output, with the current level approaching 20%, and the petroleum earnings windfall has been partially diverted to the separate $250 billion wealth fund, about equal to the reserve drawdown in recent years. A 5% value added tax was introduced after excise levies went on to soda and tobacco to also encourage healthier lifestyles amid a diabetes alert. To boost coffers, payments have also slowed on outstanding contracts according to export credit agencies, and an initial $15 billion was collected from detained business executives in the Ritz-Carlton hotel accused of corrupt and irregular transactions. Officials claim they will eventually net $100 billion through continuing investigations and control over asset disposition while they are pending. Crown Prince bin Salman embarked on a global financial tour after the action to tout his economic reform agenda and the Saudi Aramco IPO as a centerpiece, which may be delayed into 2019. He has been behind the aerial bombing campaign against rebels in Yemen which has displaced and sickened millions as a world’s worst humanitarian crisis. The central bank is broke, and the Saudis allocated $2 billion in January to relieve currency collapse and mass starvation. Morocco also has a King in charge who has warned of a “political earthquake” if living standards and regional income extremes are not clearly improved under the 5-year development plan. The IMF’s $3.5 billion latest precautionary line was completed to a mixed review. On 4% GDP growth and initial widening of the exchange rate band, the report urged greater flexibility and fiscal and business environment reform to also address social tensions flaring alongside core phosphate exports.
