Gulf states raised their interest rates Wednesday after a landmark decision by the US Federal Reserve to hike its rates. Saudi Arabia, Kuwait, Bahrain, and the United Arab Emirates announced hikes of a quarter of a percentage point in key official rates.

The Saudi central bank said the decision was taken in light of developments in local and international financial markets. Kuwait Central Bank Governor Mohammad al-Hashel said the increase would ensure the “competitiveness of the national currency” and support the national economy. On Wednesday, a senior banker in Oman said bank interest rates have started increasing gradually and will further strengthen in light of low oil prices and limited liquidity. Qatar said domestic interest rates are likely to rise between 2015 and 2017. All of the Gulf Cooperation Council states, except Kuwait, peg their currencies to the US dollar and have normally followed US decisions on interest rates. The plunge of oil prices has put pressure on those pegs by slashing government oil revenues and pushing the current account balances of some countries into deficit. In other news, Egypt’s Central Bank said it will hold the exchange rate steady at 7.7301 to the dollar on Thursday at its first foreign exchange sale following the US Fed’s decision. [AFP, Reuters, 12/17/2015]

 

Turkey’s Central Bank (CBRT) raised the interest rate it pays on US dollar-denominated required reserves on Thursday ahead of its last meeting of the year on December 22. The CBRT previously signaled it would wait to decide whether to raise rates in order to take its cue from the US Federal Reserve, which hiked rates on Wednesday. Failure to follow the Fed’s lead would exacerbate investor concerns about the CBRT’s independence in the face of pressure from President Tayyip Erdogan. “[Thursday’s] move is only symbolic to support markets, but it gives a signal that the December 22 meeting may result in a policy rate hike,” a liquidity manager at a bank in Istanbul bank. Erdogan’s chief economic adviser Yigit Bulut said late Wednesday that markets would respond positively to the US rate increase and that it would be beneficial for Turkey to seek an opportunity to cut interest rates. Economists have argued that Turkey is long overdue for an interest rate rise to rein in inflation and stabilize the lira, which has hit a series of record lows. [Reuters, 12/17/2015]

 

Commercial International Bank (CIB), Egypt’s largest listed company, said Thursday it had accepted an EGP 1 billion ($127.7 million) offer from Orascom Telecom and Technology (OTMT) to buy its investment bank subsidiary CI Capital. OTMT, which is owned by Egyptian billionaire Naguib Sawiris, plans to merge CI Capital with Beltone Financial, which it bought last month for almost EGP 650 million. CIB said in a statement that its board had met on Thursday and given preliminary approval for the deal. “It is important to note that consultations remain in the preliminary stages,” CIB said. “Completion of the sale depends on the results of negotiations between the two sides, the results of due diligence as well as obtaining the necessary approvals.” Egypt’s stocks rallied Thursday after news of the possible deal. [Reuters, Ahram Online, Bloomberg, 12/17/2015]

 

Finance ministers from the 15 Security Council nations will adopt a plan Thursday aimed at disrupting outside revenue that the Islamic State (ISIS or ISIL) gets from oil and antiquities sales, ransom payments, and other criminal activities. ISIS is already subject to UN sanctions under resolutions dealing with al-Qaeda. The US and Russia-sponsored Security Council resolution elevates ISIS to the same level as al-Qaeda, reflecting its growing threat and split from the terrorist network. US Ambassador Samantha Power called the meeting an unprecedented chance to bring together the people with the technical abilities to starve ISIS of resources. The meeting will be chaired by US Treasury Secretary Jacob Lew, who said earlier this month that cutting ISIS off from the international financial system is “critical to effectively combating this violent terrorist group.” [AP, 12/17/2015]

 

Iraq’s parliament adopted a 2016 budget of 105.8 trillion Iraqi dinars ($88.2 billion) on Wednesday based on projected oil prices of $45 per barrel. The budget includes oil production that the federal government does not currently control and envisions a rise in oil prices. This means that revenue, projected at 81.7 trillion dinars ($68.1 billion), may fall short of projections. Iraqi Parliament Speaker Salim al-Juburi announced that the budget had been approved, but did not provide further details. The budget figure was little changed from the 106 trillion dinars the cabinet proposed last month. The budget projects a deficit of 24.1 trillion dinars ($20.1 billion). “The Finance Ministry must now do its utmost to bring lenders to sign bond deals to bridge the tough deficit gap,” said a member of Parliament’s finance committee Ahmed Hama. [AFP, Reuters, 12/16/2015]

 

Saudi Aramco names three new senior vice presidents | Reuters

Gulf Arab defense spending drops for first time in decade | Reuters

Gulf sovereigns tipped for record funding in bond markets | Reuters

Qatar willing to supply Turkey’s gas needs | Daily Sabah

Saudi food company plans $38 million expansion in Egypt | Ahram Online

Egypt’s Central Bank to meet government, reconvene on December 24 | Reuters

Saudi investments in Egypt focus on infrastructure over three years | Reuters

Egypt’s T-bill yields rise slightly at auction | Reuters

EGPC presents monthly petroleum needs to International Cooperation Ministry | DNE

Algeria to boost 2016 oil output, offer rights amid global glut | Bloomberg