The International Monetary Fund has approved release of the second USD 1.25 bn tranch of the USD 12 bn IMF Extended Fund Facility to Egypt, following an IMF Executive Board review on Thursday. The funds should already have hit Egypt’s coffers, according to MENA. “The continued fiscal consolidation aims to place public debt on a declining path… The main deficit-reducing measures are the increase of the VAT rate, continued reforms of energy subsidies and wage restraint,” according to an IMF statement. The board also said Egypt has made significant progress on structural reforms, noting the passing of industrial permits, investment and bankruptcy acts, which it called “critical pieces of legislation necessary to strengthen the business climate, attract investments, and promote growth.”

Top IMF officials praised the Ismail government’s economic reform program, particularly the recent cuts to fuel and electricity subsidies in addition to the 200 bps interest rate hikes, the latter of which took the nation by surprise. “The government and the central bank have taken the right measures to rein in inflation, reduce the budget deficit, and set the Egyptian economy on a path to stability and growth,” said IMF Managing Director Christine Lagarde. She added that she was “very pleased that the government has taken and will continue to take measures to protect the poor and vulnerable groups, including through increasing social spending.”

“Measures taken by the Egyptian government, such as increasing the prices of fuel and electricity and imposing the value-added tax, should have a positive impact on the budget," IMF mission chief for Egypt Chris Jarvis said in statement to MENA. "Such measures help achieve initial surplus in the budget of the Egyptian government for the first time in 10 years," he added.

On inflation, Jarvis said that the key test is to make sure that high inflation doesn’t become permanent. “The actions that the central bank are taking are the right ones to achieve its inflation targets,” said Jarvis via twitter. He expects inflation to fall by the end of this calendar year and be much lower by next summer.

We would beat the drum again about interest rate hikes being a phenomenally bad idea in a nation as under-banked as Egypt, but it’s rather clear the folks at the IMF aren’t listening to us…

The news comes as the IMF appears to have lowered its growth estimate for the fiscal year that ended a couple of weeks ago, saying the economy is likely to have grown 3.5% in FY2016-17, down from an initial estimate of 4.0%. It has also revised its projection for the current fiscal year, lowering it to 4.5% from 4.8%. The IMF now also expects the budget deficit for FY2016-17 to reach 10.5% of GDP, up from a previously projected 9.8% of GDP. However, the IMF’s projections for the budget deficit in FY2017-18 would appear to be more optimistic than the government’s, with the Fund expecting it to reach 8.5% of GDP from 8.4% of GDP in its previous evaluation. The government is anticipating the deficit this fiscal year will come in at 9.1% of GDP. On inflation, the IMF’s initial estimates proved way off point, with consumer price inflation at the end of last fiscal year being revised to 32.8% from 16.6%. The fund expects inflation to drop to 10.3% at the end of FY2017-18.

Gov’t presents its figures for FY2016-17: Planning Minister Hala Saeed appeared to respond to the IMF’s macro indicators with its own forecast, seeing GDP growth for FY2016-17 landing at no less than 4% from an initial projection of 3.8-4%, she said in a press conference on Saturday, according to Reuters. She projects that GDP growth for the fourth quarter of last fiscal year will exceed 4.5%, according to Al Mal. On inflation, Saeed said that the recent subsidy cuts in fuel and electricity would have a minimal impact on inflation, the newspaper reports.

Meanwhile, the Finance Ministry puts the budget deficit for FY 2016-17 at 10.8% of GDP, down from 12.5% in FY2015-16, according to Vice Minister of Finance Amr El Monayer. The primary deficit also receded to 1.5% of GDP in the last fiscal year, compared to 3.5% in the year before. Tax revenues in FY2016-17 rose 30% year-on-year to EGP 433 bn, El Monayer told the press on Thursday, according to AMAY.

Meanwhile, foreign interest in Egyptian debt remains strong. Foreign holdings of Egyptian debt topped EGP 204 bn (USD 11.4 bn) as of 11 July, the last treasury sale before Thursday's, the head of public debt at the Finance Ministry Sami Khallaf told Reuters on Thursday. Foreigners bought EGP 7.9 bn (USD 440.1 mn) during last Thursday’s auction making up 51% of buyers at that auction, Khallaf added. The average yield on the six-month bill rose to 22.28% from 21.15% at the last sale on July 6, while the yield on the one-year t-bill rose to 21.99% from 20.98%, according to data from the CBE. EGP 13 bn in treasuries will be sold at an auction today. We had noted last month that foreign direct investment (FDI) had risen 12% year-on-year in FY2016-17 to USD 6.6 bn in 9M2016-17.

On that front, Egypt was ranked second most popular destination for FDI in the Arab world in 2016, with inflows up 17% year-on-year to USD 8.1 bn, the Arab Investment and Export Credit Guarantee Corporation says in its 150-page Investment Climate report (pdf). The Chinese have been Egypt’s top investors over the last five years, commissioning around 20 projects with a total investment value of USD 22.6 bn, the report says, citing UNCTAD figures. Top FDI earners include energy, real estate, coal, chemicals, and food industries.

IPO WATCH- It seems state-owned Banque du Caire will list no more than 20% of its shares during its upcoming initial public offering, according to comments by BdC Vice President Soha Suleiman picked up by Al Masry Al Youm. If true, the report throws cold water on previous reports, which suggested that the bank’s IPO, which will be managed by EFG Hermes and HSBC, would see up to 49% of the bank’s stock on offer, including an international offer to institutional investors of 29% and a domestic offer to retail investors on the EGX of 15%. Five percent would have been earmarked for trading as global depositary receipts on the London Stock Exchange.

As for the IPO of petroleum services outfit Enppi, the state is expecting to net between USD 213 mn and USD 267 mn the sale of a 24% stake, sources close to the matter tell Al Mal. The newspaper says the company will likely be valued in the EGP 16-20 bn range. A consortium led by CI Capital and including Jefferies and Emirates NBD Capital was tapped by the government to serve as lead managers and bookrunners of the listing, likely to be the first IPO of a state-owned company in 12 years. Baker McKenzie will serve as legal advisor, though it’s unclear whether the firm is counsel to the issuer or to the lead managers.

Finally, the IPOs of the four companies that will operate the Siemens power plants appear likely to be pushed to FY2018-19 from FY2017-18, the head of the Egyptian Electricity Holding Company Gaber Desouky tells Al Mal. Last year, the government had announced that it was forming four companies to own the three combined cycle plants of Burullus, the new capital, and Beni Suef build under a contract handed to Siemens. The companies were supposed to be formed this month, according to Electricity Minister Mohamed Shaker. Siemens, Germany’s Steiaj, an Orascom-ADERA Energy consortium, and an Elsewedy-EDF consortium have submitted their technical offers for the tender to manage the plants.

IPO WATCH- Nile Financial Leasing is planning to list 25-40% of its shares on the EGX in 4Q17, company chairman Mohamed Amer tells Al Borsa. The will use the proceeds from the offering to expand into SME leasing, Amer said. Nile Financial has yet to settle on a lead manager or bookrunner for the transaction.

EFSA issues new financial solvency regulations for brokerage houses: The Egyptian Financial Supervisory Authority (EFSA) has issued new financial solvency regulations that will require securities and brokerage firms to keep cash on-hand equivalent to 10% of their total liabilities, Al Mal says. Brokerage houses will also have to electronically file a daily liquidity report to both the bourse and EFSA to replace the paper report they used to deliver on a weekly basis under the old system. The new directives were published in the Official Gazette yesterday (you can view the full issue here courtesy of Youm7).

Orascom Telecom Media and Technology (OTMT) is planning to use c. EGP 3 bn of excess liquidity to grow its investments in 2017, Investor Relations Director Marwan Hussein tells Al Borsa, without disclosing further detail.

Apache, Shell, and Apex among the winners of Oil Ministry’s Western Desert oil exploration tender: The Oil Ministry is expecting to sign contracts “soon” with the winners of its crude oil exploration tender in the Western Desert, Minister Tarek El Molla said, according to Youm7. Apache, Royal Dutch Shell, Apex International Energy and Merlon will together invest at least USD 160 mn and pay signature grants totaling USD 65 mn. They’all be drilling for oil in five concessions in the Western Desert, according to the minister.

Oil Ministry to launch oil exploration tenders in border with Saudi by year’s end: The ministry plans to commission more oil drilling in 2017 through Ganoub El Wadi Petroleum Holding Company, El Molla said. Five international firms have already been awarded contracts to begin conducting geological surveys and initial scans along the border with Saudi Arabia in the Red Sea. The ministry plans to open the floor to exploration activities in the area — which surrounds the contentious Tiran and Sanafir islands — before the year is up, AMAY quotes El Molla saying. Among them are WesternGeco Schlumberger and TGS, whose combined investment comes close to USD 750 mn.

US companies operating in any one of the four countries boycotting Qatar could run afoul of American anti-boycott laws if they are pressured to also sever ties with Qatar, the Associated Press reports. Under obscure tax and export provisions designed decades ago to protect Israel, US companies can be punished if they accept a foreign country's demand to comply with a boycott not supported by the United States. The provisions were established to ensure American firms aren't used to advance another nation's foreign policy. Egypt, Saudi Arabia, the United Arab Emirates and Bahrain have yet to demand that US companies follow their lead and boycott Qatar, the newswire notes.

Meanwhile, France is calling for the lifting of all sanctions that affect Qatari nationals, French Foreign Minister Jean-Yves Le Drian told reporters in Doha yesterday after meeting with his Qatari counterpart in their attempt at shuttle diplomacy, Reuters reports. This comes as the UAE’s Minister of State for Foreign Relations Anwar Al Gargash said the countries “are heading toward a long estrangement” and that crisis is “far from a political solution,” the AP reports.

Global PR outfit Weber Shandwick is withdrawing from a public relations contract with Egypt six months after signing, PR Weekly said last week. The move followed a decision by Cassidy & Associates last month to begin a management buyout from Interpublic Group — parent company of both Weber and Cassidy. Weber has reviewed its lobbying accounts on behalf of foreign governments and decided to discontinue work with the government of Egypt and all such accounts going forward, said Michele Guida, SVP of global corporate communications at the agency. The contracts which was signed back in January, stirred some controversy in the US press.

An Egyptian man attacked six tourists with a kitchen knife at two Hurghada resorts on Friday, killing two German women and injuring four others, Reuters reports. The attacker first killed the two Germans and injured two others at the Zahabia hotel, where a similar attack took place last year, before swimming to the Sunny Days El Palacio resort, where he wounded two more, the newswire reports. The German Foreign Ministry issued a statement confirming that the two tourists who were killed were German women and condemned the attack as “a criminal act of the highest degree.” The nationalities of the other victims remain unclear, with one security official telling the newswire that there were two Czechs and two Armenians, and another claiming a Russian was among those injured.

An Interior Ministry statement on Friday said the assailant had trespassed onto the resort’s property from a neighboring public beach, but sources close to the investigation tell Reuters that he bought a EGP 100 ticket to enter Zahabia’s beach. The attacker, identified as 29-year-old Abdel Rahman Shaaban, reportedly held a conversation with the two German women in fluent German before attacking them with the knife, according to the Associated Press. Shaaban reportedly told security guards at the resort that he was not looking to attack any Egyptians. There have been no claims of responsibility for the attack, “but it appeared to have been inspired by recent calls made by the local affiliate of the extremist Islamic State group on its followers to attack Egypt’s minority Christians and foreign tourists.” Prosecutor General Nabil Sadek ordered State Security to investigate the incident, Al Masry Al Youm reports.

The Canadian government updated its a travel warning on Friday, advising its citizens to refrain from nonessential travel to Egypt and to “exercise a high degree of caution” when traveling to Hurghada and Sharm El Sheikh.

The knife attack came as three gunmen on a motorbike opened fire at a police checkpoint in Badrasheen, killing five members of the police force on Friday, according to an Interior Ministry statement. The assailants fled when another member of the police service who was nearby opened fire on the attackers. Police forces arrested yesterday four alleged terrorists suspected of involvement in the shooting, Al Shorouk reports.

The two attacks underscore terrorists’ reduced abilities to carry out large-scale attacks in Egypt, as terror attacks against the police force target checkpoints rather than police stations, the State Information Service said in a statement (pdf). Attacks against tourists have also been limited over the past four years, the statement added.

A man also attacked a security guard at a church in Alexandria yesterday after the guard asked to inspect the contents of a backpack he was carrying into the church, AFP reports. The assailant was identified as 24-year-old Abdallah Adel Hassan via security camera footage at the church, according to Al Mal (runtime 0:45). Hassan is currently being questioned by police.

The attack came two days after Egypt’s Coptic Orthodox and Catholic churches reportedly received instructions to halt all events outside churches for the remainder of July and August due to security concerns, the Associated Press reports. The Catholic Church “complied with the interior minister’s decision to cancel church trips and camps until further notice,” a church spokesman told Reuters. A source from the church also tells the newswire that security has been beefed up at the church gates throughout last week. These measures “point to the vulnerability of Egypt’s Christians at a time when President Abdel-Fattah el-Sissi’s government is struggling to crush an insurgency led by the extremist Islamic State,” which has vowed to target Christians in Egypt, the AP says.