Egypt’s country risk is “improving” but “remains high in the medium term,” according to an emailed report from BNP Paribas. The report points to economic reforms, including the EGP flotation and fiscal reforms, as moves that have triggered positive momentum. Renewed private capital inflows also “signal a return of confidence among investors.” BNP Paribas says that given scheduled financial support, there is “a better country-risk outlook for the next 18 months. In the medium term, several trends are encouraging: The coming on stream of a new gas field will save a substantial part of the energy bill, some large companies could gain export market shares and the large and growing Egyptian market is a source of substantial economic growth.”

BNP Paribas says medium term risk is “high” because of three factors. First, social pressure exists in a context of the sharp rise in inflation. Second, the continued fiscal and current account deficits, especially external accounts, remain fragile and dependent on foreign capital inflows. The third set of risk factors is external as regional political tensions remain high, exposure to changes in commodity prices, and the vulnerability of capital flows to emerging markets. Assuming the reform process continues, the improvement of country risk in the medium term will depend on “curbing inflation, generating economic growth and external financial support.”

Omm El Donia’s economic reform program unfolding just fine for now, says IMF mission chief for Egypt Chris Jarvis, adding that the Finance Ministry and Central Bank of Egypt have been implementing the policies agreed upon with the Fund. Jarvis’ statements to Al Borsa follows meetings between Finance Minister Amr El Garhy and an IMF team in London over the weekend to discuss the government’s progress on the reforms. An IMF delegation is due to visit in April to review progress on the reforms to which we’ve committed before the fund disburses the second payment of the USD 12 bn bailout package.

2016 wasn't a bad year for Egypt M&A, ECM flow. With the headwinds presented by an exceptional spread between official and parallel market exchange rates for most of the year, last year was never going to be the same type of banner year for Egyptian merger, acquisition and initial public offering activity as was 2015. But the latest Reuters Deals Intelligence Middle Eastern Investment Banking Analysis suggests it wasn't a year over which to commit seppuku:

• Egypt was the most-targeted nation for inbound M&A, accounting for 44% of flows into the Middle East.
• EFG Hermes’ advisory on Solb Misr’s USD 1.135 bn sale to the National Service Projects Organization ranked as the sixth-largest Middle East M&A announced last year and the third-largest completed.
• Eni's sale of a USD 1.125 bn stake in the Zohr supergiant gasfield to Rosneft was the seventh-largest transaction announced last year (it was completed in early 2017).
• Egypt was the third-most active issuing nation on the equity capital markets front, with USD 245 mn in transactions compared with USD 1.4 bn for the UAE and USD 799 mn in KSA.
• EFG Hermes was ranked fifth on the regional ECM league table with a 6.5% market share, while rival CI Capital eked out a ninth-place finish with a 1.7% share.
• EFG Hermes' IPO of cheesemaker Domty was the eighth-largest ECM transaction last year and the third-largest IPO. CI Capital's advisory to cheese maker Obour Land was the tenth-largest ECM transaction and fourth-largest IPO.
• The Ismail government's USD 4 bn eurobond was the fourth-largest debt issue announced last year after competing offerings from Saudi Arabia, Qatar, and Abu Dhabi. Egypt’s eurobond was 3.1x oversubscribed.

Okay, can you put that in context? Total spending on Middle East investment banking fees topped USD 820 mn last year, up 18% year-on-year. Total fees earned on syndicated lending were at a nine-year high, while ECM underwriting fees plunged to a 12-year low and fees generated from M&A were the lowest since 2012. Other highlights:

• The total value of M&A closed last year in the Middle East was down 16% to USD 46.9 bn; the merger of NBAD and FGB in the United Arab Emirates is both the largest domestic MENA M&A of all time and the largest transaction announced last year. Financials accounted for 355 of all M&A activity with at least one Middle East counterparty, followed by energy and power and real estate.
• Equity capital market issuances fell 55% in value to USD 2.6 bn last year, the lowest annual total since 2004. Eight IPOs accounted for 35% of ECM activity in the region, with the lion's share of activity in the healthcare, financials and media & entertainment industries.
• Debt capital markets activity soared 145% thanks to KSA's record USD 17.2 bn bond sale, closing the year at USD 77.78 bn.

And before we change gears: EFG Hermes was the only Egyptian firm to make the separate Reuters ranking of financial advisors in its Emerging Markets M&A Review for 2016. EFG Hermes was ranked 21 in the region (ahead of Deutsche Bank and Bank of America Merrill Lynch) with three transactions, up from 51st in 2015. The list was topped by UBS, Crédit Suisse, and JP Morgan.

Speaking of CI Capital: Tiba Group’s Saddiq Afifi says he is now looking to acquire a 10%stake in the investment bank after previously announcinghe was backing out of the transaction, Al Borsa reports. He reportedly said that he had wanted to see whether the Egyptian Financial Supervisory Authority would approve the sale, which it did earlier this month. Former Zamalek football club chairman Mamdouh Abbas and Compass Capital’s Shamel Aboulfadl have pulled out, according to sources close to the transaction. The lineup of investors will be finalized today, with the transaction set to be completed this month, the sources added.

UK tour operators selling holidays to Sharm despite gov’t warning: UK tour operators have apparently been selling holiday packages to Sharm El Sheikh, ignoring the Foreign and Commonwealth Office’s warning against travel to the destination, the Sun reports. Thomas Cook and Thomson have now started accepting bookings for the autumn season, despite the fact the trips may not go ahead if the warnings remain in place. Sun reporters found that some booking agencies have barely been mentioning the warning. The UK government, including Foreign Secretary Boris Johnson, has been offering us nothing but platitudes on lifting the warning, despite declarations that the country is safe. Once again, the private sector moves faster than government.

In other tourism news: The House of Representatives will not support raising the price of tourist visas to USD 60 from USDU 25, citing the harm it could cause the still-slumping industry, MPs tell Al Borsa. The House Tourism and Aviation Committee will be hosting the ministers of tourism and foreign affairs today to discuss the proposal, which met with criticism from the international community at the ITB Berlin travel trade show last week. The Ismail cabinet is preparing a study to reassess the impact of a visa fee hike on tourist inflows, Tourism Minister Yahya Rashed said at a press conference, according to Al Mal, adding that he plans to discuss the matter further with the cabinet soon. We rarely applaud our nation’s parliamentarians, but they’re doing the right thing in this case.

Discount minimarket chain Kazyon will invest some EGP 800 mn in growth this year and plans to open 100 new branches, says Mohamed Kharma, according to remarks carried by Al Shorouk. Kharma, executive director at Kazyon parent company Tawfeer for Food Products, says the homegrown chain retails products for 10%-20% below supermarket prices.

Did Disneyland cut off 28 Egyptian textiles exporters? Disneyland isn’t the happiest place on earth for Egyptian textiles exporters after reportedly canceling contracts with 28 of them. The stated reason? Egypt’s political and economic issues, according to government sources. These sources tell low-tier news outlet Masrawy on Monday that the government has requested that Israel intervene as these textiles, which bring in export receipts of some USD 150 mn per annum, are exported through the Qualified Industrial Zones (QIZ) agreement, which allows Egyptian products to enter the US, customs-free, as long as the products include at least 10.5% Israeli content. Color us skeptical until more details emerge, because well, it’s Masrawy.

Was Wael Fakharany told last month he was on his way out? Now-former Careem Egypt managing director Wael Fakharany was allegedly informed last month that he was on the way out, Al Mal claims, citing unnamed sources it claims have knowledge of the matter. Fakharany’s reaction is “perplexing” to the company, the sources add. The clash between Fakharany and top brass at the ride-sharing company had been ongoing for some time and repeated mediation efforts were unsuccessful. News reports on Monday said that Fakharany might be suing Careem.

KYC regs for capital markets are tightening: Know-your-client regulations have been tightened up in the latest amendments to the Capital Markets Law’s executive regulations issued by Investment and International Cooperation Minister Sahar Nasr, Al Borsa reports. The amendments, which appear to impact just about every form of capital market transaction, also allow the Egyptian Financial Supervisory Authority (EFSA) to investigate individual investors (whether foreign or local) on M&A transactions, share purchases, or setting up a fund if their stake in it exceeds 25%, said EFSA chief Sherif Samy.

The government will meet constitutional requirements for spending on health and education in the FY2017-18 budget, promised Prime Minister Sherif Ismail in press statements on Tuesday. The constitution mandates that health and education spending amount to 8% of total state expenditures. Ismail did not elaborate, but he had previously stated that total expenditures will surpass EGP 1.1 tn. Deputy Finance Minister Mohamed Maait had said that increased spending on health — likely due to the rollout of the Universal Healthcare Act — and education were behind the rise in expenditures. Ismail added that the budget is still being drafted and will be ready to present before the cabinet’s economic group at its next meeting, Al Masry Al Youmreports.

Critics of the automotive directive are still trying to derail the bill and they’re using Europe as a peg: A number of local auto industry players (cough, importers) are suggesting that discussions on the automotive directive — which would give tax breaks to local manufacturers and protect them against unfair advantages now enjoyed by EU, Turkish and Moroccan imports — should be postponed until the government and industry players can reach consensus over its clauses and to “avoid any squabbles” with European car manufacturers, who had expressed their distaste for the directive, Al Mal says. The automotive directive is currently before the House of Representatives’ Industry Committee and was on track to head to a plenary session vote by mid-March.

MOVES- Wagih Mostafa Amin El Tazi was reappointed as vice chairman of the Egyptian Exchange, Al Masry Al Youm reports. El Tazi’s appointment is effective 18 January 2017 and expires with the end of the current the board of directors’ term on 30 June with the end of the fiscal year.

Investment and International Cooperation Minister Sahar Nasr will run the Public Enterprise Ministry on an interim basis while current minister Ashraf El Sharkawy seeks medical treatment in Germany, the Prime Minister’s Office said yesterday.

Cairo Metro’s financial troubles: Cairo Metro owes overdue electricity bills worth EGP 260 mn and water bills worth EGP 40 mn, Ahram Gate reports. The companies are now calling for their receivables and threatening to take legal action and switch off access to electricity and water, according to Cairo Metro’s spokesperson Ahmed Abdel Hady. Abdel Hady’s remarks come at odds with the Electricity Ministry’s spokesperson, who saidthe ministry would never cut off power access to such a “vital state institution,” but said there is action to resolve the financial dispute. This follows the news that at least 11 companies are refusing to supply Cairo Metro with spare parts and maintenance services until the company makes good on its debts. The House of Representatives’ Transport Committee is giving Transport Minister Hisham Arafat three weeks to present them with his strategy to revamp sector activities and improve their performance (including the Cairo Metro), a promise he had made after he was sworn in last month, Al Mal says. So far the strategy involved shopping for investors to provide USD 15.2 bn to fund the ministry's projects. The only way this stuff makes it into the press is if it suits someone’s interests, and our suspicion is that the folks at the Metro are angling for a fat increase in their budget allocation.

The discovery of the Zohr gas field has boosted hopes of other such finds in the eastern Mediterranean that could help meet Europe's energy needs, Eni’s Chief Exploration Officer Luca Bertelli told the Associated Press. The discovery “has reinvigorated the interest of other major oil and gas companies in the region,” he says. Speaking of potential off the waters of Cyprus, Israel, and Lebanon, he says: “I believe the potential is here, but we need to go step by step … If we don't drill, we don't know.”