Page 7 - Downstream Monitor - MEA Week 28

DMEA finanCe & inVestment DMEA
IMF approves Brazzaville facility
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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 nancial reform programme, in a statement 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 was at 77% ofGDP,butbyOctoberofthatyearithadrevised its estimates to 110% of GDP, or $9.1bn, accord- ing to the Jubilee Debt Campaign. Debt has fallen 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 Brazza- ville’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”.™
Egypt arrears behind schedule
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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 did not provide a rm date.
In January, Cairo told the International Monetary Fund (IMF) that it intended to have the debt paid o 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 increasing by around 19% and diesel by 23%. In addition, taxes have increased over the last couple of years, with the introduction of VAt and a devaluation of the Egyptian pound.
the IMF has welcomed these moves. It described reform of fuel subsidies as a “sig- nificant accomplishment”, noting that this would provide space for more targeted reforms
intended to help the country’s poorest. A state- ment from the Washington-based institution 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 pro- vided the nancial means for it.”
One good that remains offlimits 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 11 billion 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 in its o shore.
Plans for additional Israeli supplies are under way, although it appears gas will not ow into Egypt until the end of the year.™
Week 28 17•July•2019 w w w . N E W S B A S E . c o m P7