Page 7 - AfrOil Week 28

AfrOil PERfoRmAnCE AfrOil
Egypt arrears behind schedule
EgyPt
EGYPT has reduced the amount it owes to oil and gas companies to $900mn, Egyptian Petro- leum Minister Tarek el-Molla told Reuters last week. is is a reduction from $1.2bn a year ago. “We will settle [the remainder] soon, God will- ing,” he was quoted as saying, although he did not provide a rm date.
In January, Cairo told the IMF that it intended to pay o the debt by the end of June. Previously, the government had said it intended to settle the arrears by the end of 2019, which appears to be a more likely timetable.
Under a programme agreed with the IMF, Egypt is reducing the amount of nancial sup- port it gives to its citizens. Fuel subsidies were cut at the beginning of the month, with gasoline prices consequently rising by around 19%, and diesel by 23%. In addition, taxes have increased over the last couple of years through the intro- duction of VAT and a devaluation of the Egyp- tian pound.
The IMF has welcomed these moves. It described reform of fuel subsidies as a “signif- icantaccomplishment”,notingthatthiswould provide space for more targeted reforms intended to help the country’s poorest. A
statement from the Washington-based insti- tution in May said the government’s social protection package was “critical in garnering broad public support for di cult reforms. e reduction in regressive and ine cient fuel subsidies has provided the nancial means forit.”
one staple that remains o -limits is bread. e Ministry of Interior Trade, in early July, said it would cover the cost of higher cooking gas charges, rather than bakeries. e government produces more than 11bn loaves per month, which it distributes to the eligible – around 76mn people – for a xed, low price.
While the pressure is on to reform the subsidy system, the government is always aware of the sensitive nature of bread prices and the role these played in rioting in the late 1970s. ere were also protests in 2017 over government e orts to reduce the amount of subsidised bread.
Egypt has increased the amount of lNG it exports, driven largely by the volumes of gas produced from its offshore. Plans for addi- tional Israeli supplies are underway, although it appears gas will not ow into Egypt until the end of the year.™
PoliCy
IMF approves Brazzaville facility
Congo bRAzzAvillE
THE International Monetary Fund (IMF) has approved a $448.6mn credit facility for Congo Brazzaville. The agreement provides for an immediate payment of around $44.9mn.
e country has been su ering from a major economic crisis as a result of the 2014 oil price crash. Meanwhile, the government has run up unsustainable debts, including just under $3bn owed to China. Beijing agreed to restructure the debt in May of this year, which was seen as a pre- condition for the IMF support.
The international agency said this was intended to support the Congolese economic and nancialreformprogramme,inastatement on July 11. e programme is intended to help Congo Brazzaville tackle its debt sustainability issues and improve governance – particularly in the oil sector.
Congo Brazzaville was “hit hard by the oil price shock and delayed fiscal adjustment, amidst governance challenges and unsustain- able debt. e shock eroded scal and external bu ers and triggered a deep recession,” said the IMF’s acting chair, Mitsuhiro Furusawa.
Much was made of plans to broaden the tax base and strengthen compliance, while
increasing the transparency of public nances and eliminating o -budget spending.
The IMF agreement “should be accompa- nied by continued good faith e orts to restruc- ture commercial debt to continue to ensure the country’s debt sustainability”, Furusawa said. There are challenges to the country’s medi- um-term outlook as a result of oil price volatility, he continued.
one of the problems has been uncertainty over how much debt Congo Brazzaville actually has. In early 2017, the IMF said debt stood at 77% of GDP, but by october of that year it had reviseditsestimatesto110%ofGDP,or$9.1bn, according to the Jubilee Debt Campaign. Debt has improved to around 90% this year.
is number does not include $1.2bn claimed by Commisimpex, a construction company, which has been pursuing Brazzaville in various courts and is now trying to collect.
Global Witness, a natural resource-focused NGo, raised concerns about Congo Brazzaville’s use of oil-backed loans in a June statement. It described the country’s state-owned Société Nationale des Pétroles du Congo (SNPC) as a “notorious black box”.™
Week 28 16•July•2019 w w w . N E W S B A S E . c o m P7