EconSource: Egypt Central Bank Holds Exceptional $500 Million FX Auction

The Central Bank of Egypt (CBE) kept the pound stable at 7.7301 pounds against the dollar at an exceptional auction on Sunday for the sale of $500 million to cover imports of strategic goods, pumping foreign exchange into an economy that has been starved of dollars. “I think the sale could temporarily hold the decline [of the pound] for a couple of days but the investors and importers are looking for a more sustainable solution because the [currency] shortage situation has not been tackled,” said Head of Equities at Beltone Financial Hany Genena. “It is just an auction to clear the backlog so the gap may stabilize temporarily,” he said. The CBE normally sells no more than $40 million at its regular foreign exchange auctions, which are held three times a week. A CBE official said that the bank sold $551 million to banks on Sunday and no outstanding imports of goods remained. [Reuters, Ahram Online, DNE, Aswat Masriya, 3/6/2016]

Moody’s cuts outlooks for four Gulf states, lowers Bahrain to junk
Moody’s Investors Service cut its outlook for the debt ratings of Saudi Arabia, the United Arab Emirates (UAE), Kuwait, and Qatar and lowered Bahrain’s rating to junk, citing concern over the impact of low oil prices on the Gulf countries’ finances. Saudi Arabia’s Aa3 rating was placed on review for a possible downgrade, Moody’s said, adding that it would study whether Riyadh’s efforts to expand its non-oil revenues and diversify its economy were likely to be successful. Moody’s also acknowledged that the UAE’s economy is more diversified than most in the region, but added that “the structural shock to the oil market is weakening the UAE’s government balance sheet and its economy, and therefore its credit profile.” Moody’s cut Bahrain’s rating to below investment grade. It kept the rating on review for a further downgrade. Moody’s announcement follows a mass downgrade of oil producers by Standard & Poor’s in mid-February. [Reuters, AFP, 3/5/2016]

Saudi Arabia said to hold out bond mandate prospect to banks
Saudi Arabia is holding out the prospect of a role in its first international sovereign bond to banks that will participate in a loan to the government. Banks were briefed that the largest lenders on the loan, which may be as much as $10 billion, will likely be appointed to arrange the bond. Saudi Arabia is looking for sources of funding to plug a budget deficit that is expected to reach 17.8 percent of economic output this year. So far, the government has mostly relied on a domestic bond program and drawing down foreign reserves. Saudi Arabia has not publicly acknowledged the international bond plan, which was first reported in November. No mandates on a bond issue are guaranteed and the kingdom may decide not to go ahead with the sale, sources said. [Bloomberg, 3/7/2016]

Iran and Turkey aim to triple trade to $30 billion
Iran and Turkey aim to triple their annual trade to $30 billion within two years. Turkish Prime Minister Ahmet Davutoglu met with Iran’s First Vice President Eshaq Jahangiri in Tehran over the weekend. “We have set a target of $30 billion for our trade,” Jahangiri said in a press briefing broadcast on state television, outlining a two year timeframe for upping the figure from its current $10 billion. “The main obstacle that prevented us from reaching our goal were the sanctions [on Iran]. Being free of those means we can easily surpass our goal of $30 billion,” Davutoglu said, adding that he hoped to encourage mutual direct investment. Turkey mainly sells machinery, vehicles, and iron and steel products to Iran. Oil and natural gas make up 90 percent of Iranian exports to Turkey, the Turkish Foreign Ministry said. [AFP, Reuters, 3/5/2016]

Battle between rivals of Libya’s $67 billion fund reaches UK court
A dispute over the leadership of Libya’s $67 billion sovereign wealth fund reached London’s High Court on Monday, potentially paving the way for litigation against two global investment banks to move forward. The Libyan Investment Authority (LIA) is seeking to pursue Goldman Sachs and Societe Generale in the UK courts for more than $3 billion it claims was mismanaged. Both banks have rejected the allegations. The fund, however, is mired in a power struggle between two rival chairmen, Hassan Bouhadi and Abdulmagid Breish. Bouhadi initiated proceedings in London’s Commercial Court in September 2015 to determine the issue of authority over the LIA. The issue needs to be settled to provide clarity for litigation against the two investment banks. In the absence of any decision from Libya, a UK court must now rule on who has the authority to bring the litigation against the banks. [Reuters, 3/7/2016]

Also of interest
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Low oil prices put strains on Gulf currency pegs | AFP
Saudi Arabia says it will maintain its oil market share | Reuters
Egypt’s Suez Cement says profit transfers hit by currency crisis | Reuters
Egypt replaces head of agriculture quarantine authority | Reuters
Telecom Egypt net profit jumps 111 percent after tax changes | Reuters
Egypt’s Orascom lends Beltone EGP 1 billion to acquire CI Capital | Reuters
Fitch affirms Tunisia’s ratings at BB-, revises outlook to negative | TAP
Tunisia’s phosphate sector records loses of TND 5 billion since 2010 | TAP
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Work on Iraq-Turkey oil pipeline to be complete in days | Reuters
Pipeline outage almost halves northern Iraq’s February oil exports | Bloomberg, Reuters