Three factors have helped the Egyptian economy “return to brighter prospects,” Pascal Devaux writes in a research note for BNP Paribas (pdf): The EGP float, major fiscal reforms with the support of international donor funds, and the “accelerated” development of natural gas resources that are expected to “trigger a significant reduction in the trade deficit and ensure the country’s energy supply.” However, Devaux says the reforms came at the cost of impacting households’ purchasing power and that the ensuing monetary responses create “a threat for public finances.” Devaux expects FDI to be concentrated in the energy sector with higher interest rates scaling back investment decisions. “Excluding the energy sector, nonresident investment decisions are generally made by companies that are already present in the Egyptian market, and many foreign companies are taking a wait-and-see approach. An increase in public investment, which is one of the government’s priorities, could provide additional support.” He stresses that some moves brought about imbalances to the market: “in an economy with a low level of bank penetration, the massive increase in interest rates did not bring down inflation, but increased the cost of servicing the public debt.”

The EGX is considering removing restrictions on global depository receipt (GDR) transactions, outgoing bourse chairman Mohamed Omran said yesterday on his last day in charge, according to Ahram Gate. The restrictions were put in place when access to FX became restricted, he says. Omran hints that the EGX could cancel a regulation that forces the proceeds of GDR sales be converted to EGP before being distributed to beneficiaries. This would allow people selling GDRs to receive their proceeds in foreign currency. Omran also said foreigners have increased their exposure to Egyptian stocks by a net EGP 11 bn since the EGP float, according to Reuters. Egypt's stock exchange has attracted a total of EGP 15 bn in foreign investment since 2013, Omran told a news conference. He expects “the EGX will also begin trading bonds in 1Q2018,” Reuters notes.Omran also talked about privatising the EGX being a possibility, according to Al Masry Al Youm.

…In related EGX news, EFSA has greenlit plans by Amer Group and Porto Groupto issue up to one third of their issued and paid-up capital as GDRs. Both companies are planning on listing GDRs on the LSE, according to regulatory filings.

Gripes from the private sector on interest rate hikes, inflation hit the pages of the Financial Times: With the end of the FX crunch, Egypt's private sector has been squeezed by inflation and the 700 bps in interest rate hikes pushed through in its wake, the Financial Times’ Heba Saleh writes. Despite making Egypt an attractive destination to some foreign investors, the combination of the float, inflation, and the hikes have driven operating costs of companies to new highs, with many being unable to pass the costs on to the consumer. “We have increased prices on average by 15% because consumers’ purchasing power cannot take more, whereas the increase should have been more like 30%,” says Ibrahim Soudan, who heads cheese manufacturer Riyada. These gripes come despite reassurances from the IMF’s Chris Jarvis that raising rates will lead to inflation falling to 11-13% by mid-2018. “It is ‘imperative for interest rates to go down as quickly as possible,’ said Pharos Holdings COO Angus Blair. ‘Without private sector investment, economic growth will remain below par and there won’t be an improvement in employment figures,’ he says.”

IPO WATCH: Rooya Real Estate Investment Company reportedly filed yesterday to list its shares on the EGX, according to Al Borsa. As we noted yesterday, the firm has tapped Helmy and AAIB as advisor, though it is not yet clear if a lead manager of the listing has been chosen.

The House Economics Committee seems set on making changes to executive regulations of the Investment Act, which it began reviewing yesterday, despite its input not being required at all. MPs want to raise the minimum local manufacturing component requirements to 60% from 50% and minimum export requirement to 40% from 20% for businesses to be eligible for incentives offered under the act, Ahram Gate reports. Also under fire is the ceiling for foreign labor in a company’s hiring, which the executive regulations cap at 20%, Al Mal reports. The list of gripes goes on, leaving us hoping cabinet is simply letting our fearless elected representatives to have their say before moving on with the draft as it stands.

MOVES- Pierre Finas was appointed managing director of Credit Agricole Egypt, replacing François-Edouard Drion, according to a filing with the EGX. The appointment is yet to be approved by the Central Bank of Egypt.

EARNINGS WATCH-

• Edita reported a net loss of EGP 1.7 mn in 2Q2017 down from a net profit of EGP 41.6 mn in the similar period last year. Despite the bottom line loss, Edita’s revenues continued to grow, recording an 11.2% y-o-y increase to EGP 611.6 mn. For 1H2017, Edita registered a net profit of EGP 38.7 mn, down 47.9% y-o-y. The company says “inflationary pressures on the company’s cost base along with higher interest expenses weighed down on Edita’s bottom-line profitability for the quarter… Edita’s continued ability to deliver double-digit revenue growth, despite operating in an exceptionally challenging environment and during the trough of industry seasonality, is a direct consequence of management’s early roll-out of its repricing and portfolio optimization strategy starting late 2015.”

• Credit Agricole Egypt reported a 49.4% y-o-y increase in 1H2017 consolidated net profit after tax to EGP 941.7 mn, according to a filing with the EGX.

Lebanon has hopped on the bandwagon, banning import of an Egyptian fruit: The Lebanese Agriculture Ministry has reportedly imposed restrictions on imports of Egyptian mangoes, sources close to the matter tell AMAY. Egyptian exporters are lobbying for the measure to be postponed, saying they can produce paperwork proving their produce meets international benchmarks. Iraq imposed import restrictions on Egyptian produce this week, and GCC countries have done the same this year. The news came on the heels of word that Egypt’s Agriculture Ministry signed off yesterday on a new strategy meant to boost and ensure the quality of agricultural products slated for export, according to Al Shorouk.

Meanwhile, despite import restrictions imposed by Saudi Arabia, Sudan and Kuwait and hepatitis A concerns, Egyptian strawberry exports rose 30% y-o-y in 1H2017 to 41.4k tonnes, up from 31.8k tonnes during the same period last year, Agriculture Ministry spokesperson Hamid Abdel Dayem said, according to Al Borsa. The UAE has also banned imports of Egyptian strawberries.

Egypt could hold local council elections following the presidential elections in 2018, as the House of Representatives has yet to complete its review of the Local Administration Act, Al Masry Al Youm reports. The act, which will establish elected local councils throughout Egypt’s governorates, was held up at the Egyptian Council of State (Maglis El Dawla) before being passed onto the House in October, where it has yet to see the light of day. Sources tell the newspaper the legislation will likely be passed at the end of parliament’s next session, which comes to a close in mid-2018.

PR firm APCO Worldwide has taken on lobbying for Egypt in the US after Weber Shandwick withdrew earlier this month from a contract with Egypt six months after signing, according to industry publication the Holmes Report. “[The firm would help Egypt] tell its story. … As the country returns to stability, they are paying more attention to increasing trade and investment in the region. The economy is improving, tourism is up by about 50% this year. There is a positive story to be told,” said APCO founder and chairman Margery Kraus. Unfazed by criticism that the initial account was hired by the Egyptian Intelligence Directorate, which contributed to Weber’s exit, Kraus added that said that the funding came from the intelligence service because “Egypt views its relationship with the United States as a national security issue.” Cassidy & Associates, formerly a subsidiary of Weber Shandwick, will reportedly also continue to lobby for Egypt’s General Intelligence Service.

A softer tone on Qatar? The Arab quartet boycotting Qatar said yesterday they would allow Qatari airlines to use emergency air traffic corridors as of 1 August, according to a Saudi Press Agency statement. Doha denies the news, saying the quartet is spreading “false information,” Reuters reports. Reconciliation talks have not yet begun, Reuters says in a report noting that the foreign ministers of Egypt, Saudi, the UAE, and Bahrain met in Manama yesterday. The quartet’s 13 demands have reportedly trimmed down to six. Doha, meanwhile, has reportedly been busy complaining to the UN that Riyadh should “internationalize” the Hajj. Saudi called the suggestion a “declaration of war” and Doha has denied the report.

Meanwhile, international banks have started serving Qatari clients from New York and London instead of Dubai, as the spat with Qatar has been “making it harder to do business” with it from the region, Bloomberg reports. “Lenders that handled clients such as the Qatar Investment Authority and wealthy family offices out of the Dubai International Financial Centre are shifting coverage to other global financial hubs to avoid damaging relations with the UAE and Saudi Arabia,” unnamed sources revealed. Some Qatari clients reportedly “prefer to work with bankers outside of the Gulf region,” the article says.

That’s just one way the blockade is hitting the Qatari economy: Reserves fell 30% in June as Qatar uses them to ease the liquidity crunch, imports have plummeted nearly a third, and the stock market is rocky, Bloomberg notes in a separate piece.

The person who stabbed three foreigners to death in Hurghada had tried to join Daesh, two security sources said, according to Reuters. “Investigators have recommended he face terrorism charges, the two sources said. Authorities have so far not commented officially on motives for the attack.”

The government appears to have made population control a national priority, after President Abdel Fattah El Sisi named it as the top challenge for development after terrorism last week. The Health Ministry announced that it is targeting a population of 112 mn by 2030 by curtailing the birth rate,says the Egypt Independent. Egypt currently has a new birth every 5 seconds and is on pace to have a population of 128 mn by 2030. Social Solidarity Minister Ghada Wali noted that the larger the number of children a family has, the more likely it is to be poor, with data showing that 65% of all households with nine or more people in them are below the poverty rate. The Social Solidarity Ministry will provide EGP 100 mn to 239 charity organizations working in the fields of family planning and to bring down birth rates in 10 governorates, Wali said, according to Al Mal.

Putin says the US will have to cut its embassy staff in Russia by 755, according to Reuters. Both diplomats and local staff will be impacted by the cut. The move, which would bring total staff in Moscow to the same level as Russia has in Washington, DC, comes after the US hit Russia with fresh sanctions over accusations of meddling in the US elections last year and the annexation of Crimea. The US has until 1 September to comply. US President Donald Trump has said he will sign the sanctions bill, which passed with a veto-proof margin in the Senate.