Rating agency Standard & Poor’s (S&P) downgraded Saudi Arabia, Bahrain, and Oman’s credit ratings on Wednesday, citing pressures being created by the drop in oil prices. S&P downgrade d Saudi Arabia’s credit grade by two levels to A- from A+. “The decline in oil prices will have a marked and lasting impact on Saudi Arabia’s fiscal and economic indicators given its high dependence on oil,” the ratings agency said. Oman’s credit rating was lowered to BBB- from BBB+. Bahrain was lowered to BB from BBB-, putting it two steps below investment grade. Bahrain said Wednesday it was talking with the lead managers of its latest sovereign debt offer after the S&P downgrade. “The Kingdom of Bahrain is discussing with its lead managers the next steps in relation to this announcement by S&P on the Kingdom of Bahrain’s bond transaction announced yesterday,” the Bahraini central bank said. Meanwhile, Saudi Arabia said Thursday it plans to start issuing floating-rate bonds to encourage local banks to buy its debt as it seeks to finance a large budget. [Reuters, Bloomberg, 2/18/2016]
Iraq avoids committing to oil freeze
Iraq on Thursday stopped short of saying it would curb oil production to prop up low prices, saying that negotiations are still ongoing between members of the Organization of the Petroleum Exporting Countries (OPEC). Oil Minister Adel Abdul Mahdi said Iraq supports any decision that will serve producers, prop up prices, and achieve balance in the crude markets. He did not explicitly say whether Iraq would curb its own oil output, but said any rapprochement between all sides to restrict crude output is a step in the right direction. “The deterioration of the oil prices has directly impacted the global economy and the historical responsibly of the producers requires great speed in finding positive solutions that will help prices return to the normal [levels],” Abdul Mahdi said. Meanwhile, OPEC member Libya said Thursday that it supports the production freeze but would like to increase its output when the situation allows. “Libya is not producing its quota. If conditions improved, naturally we would like to [increase production],” a Libyan OPEC delegate said. [WSJ, Reuters, 2/18/2016]
Iraq to shrink paramilitary forces due to shortage of funds
The Iraqi government has decided to cut the number of state-financed paramilitary forces due to a shortage of funds, Spokesperson for the Popular Mobilization Forces Karim al-Nouri said Thursday. Nouri said around 30 percent of paramilitary troops were expected to be laid off. Some 130,000 fighters in Iraq are affiliated with pro-government paramilitary forces. He said the decision would not affect the fight against the Islamic State (ISIS or ISIL), adding that the cuts would also cover non-combat troops providing administrative and logistical support. He did not provide details on how many combat troops will be laid off. In an interview with the state TV on Monday, Iraqi Prime Minister Haider al-Abadi hinted that there is corruption inside the paramilitaries. He also met with officials from Iraq’s provinces to discuss the country’s economic crisis. [AP, 2/18/2016]
Egypt to remove electricity subsidies by 2025
Egypt will reduce energy subsidies by 50 percent by 2020 and cancel electricity subsidies by 2025, according to the Electricity and Renewable Energy Ministry. The ministry has prepared a long-term strategy to provide electrical power until 2035, with investments of up to $135.3 billion. The strategy aims to increase the size of generated electricity starting in 2019 through power stations that use coal as fuel and through nuclear power stations. It also aims to strengthen Egypt’s electricity grid and improve connectivity. The reduction of subsidies would lessen the burden on the government budget and provide opportunities for economic growth. The Central Bank of Egypt said that the country’s economic growth slowed to 3 percent in the first three months of fiscal year 2015/16, down from 5.6 percent in the same period a year earlier. [AMAY, 2/17/2016]
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EBRD to continue supporting Tunisia under five-year development plan | TAP
Turkey becomes EU’s fifth-largest trade partner | Anadolu Agency
Turkish Lira, bonds hit by security concerns | Hurriyet