EconSource: S&P Says Saudi Banks Can Fund Up to $100 Billion of State Debt

Saudi Arabia’s banks have enough assets to absorb $75 billion to $100 billion of government securities as the Kingdom begins selling bonds for the first time in seven year, Standard & Poor’s (S&P) said. The country’s lenders held about $106 billion in cash, central bank deposits and treasury bills and another $13 billion in non-statutory deposits at the end of June, analysts said. “They have adequate liquidity to comfortably fund $75 billion to $100 billion or more in sovereign issuance in 2015-16 without much effect on their overall balance sheet,” they said. “The banks will accommodate government issuance through a gradual shift from low-yielding, short-term liquid assets and private sector credits to higher-yielding, longer-term government exposures,” S&P said. This will improve banks’ net interest margin and revenue and benefit their capital profiles. [Bloomberg, 9/3/2015]

Iraq oil output will decline starting 2018, says Morgan Stanley
Iraq’s crude production will start to decline in 2018 due to a slowdown in investment resulting from lower oil prices and a costly war with Islamist militants, according to Morgan Stanley. Iraq will pump 4.18 million barrels per day (bpd) in 2017, with output then falling to 4.132 million bpd in 2018 and to 4.127 million bpd by 2020, London’s Morgan Stanley analyst Haythem Rashed said in a report. The bank had previously forecast rising output every year to 4.6 million bpd by 2020. Iraq’s production climbed 1 million bpd in July from a year earlier, becoming the strongest contributor to global supply, Morgan Stanley said. The removal of export constraints in the south, increased pipeline capacity in the semi-autonomous Kurdish region, and the separation of heavy and light crude streams all contributed to growth. “With these infrastructure and crude marketing tailwinds now largely played out, we see limited prospects for further production growth,” Rashed said in the report. [Bloomberg, 9/3/2015]

IMF delegation to visit Egypt in two weeks
A delegation from the International Monetary Fund (IMF) is set to visit Cairo in mid-September to hold talks with Egyptian officials on recent economic developments, IMF mission chief for Egypt Christopher Jarvis told state-owned news agency MENA. Jarvis said that the visit will aim at holding talks with senior government officials regarding the country’s latest economic developments. “Egypt has adopted a good economic and reform program, which includes the first phase of rationalizing the energy subsidy system,” Jarvis said, stressing the need to implement the reform program in order to improve Egypt’s economy. Egypt has set five-year macroeconomic targets with real gross domestic product growth reaching at least 6 percent by the end of 2018/19. [Aswat Masriya, Ahram Online, 9/3/2015]

Conflict over Libyan sovereign fund reaches UK court
A conflict between Libya’s two rival governments over control of the $67 billion Libyan Investment Authority (LIA), the country’s sovereign wealth fund, has escalated with one of the would-be chairmen asking a London court to settle the dispute. Hassan Bouhadi, LIA chairman from the internationally recognized government in Tobruk, said he had initiated proceedings in the London Commercial Court to determine who has the authority to appoint a board of directors to manage the fund’s UK-based assets. Bouhadi said in a statement that clarity over control of the fund “must be laid to rest as soon as is practically possible” and that an application is likely to be heard in the British courts early next year. Bouhadi’s Tripoli-based rival, AbdulMagid Breish, said he was “disappointed” by the move. [Reuters, 9/3/2015]

Abu Dhabi’s First Gulf Bank raising $1 billion loan  
First Gulf Bank, the United Arab Emirates’ third-largest bank by assets, is seeking to raise about $1 billion from a syndicated loan to boost lending as liquidity in the economy tightens. About ten banks are expected to sign up for the loan, which is currently in the documentation stage. The size may be raised on demand, sources say. Banks in the Gulf Cooperation Council are turning to the loan market to raise funds in addition to selling bonds as a drop in crude oil prices threatens economic growth. Bank liquidity in the UAE, the second-biggest Arab economy, is tightening as an increase in lending outpaces deposit growth. First Gulf Bank last raised a syndicated loan in November 2012, when it borrowed $900 million from a three year loan. [Bloomberg, 9/3/2015]

Also of interest
Saudi August non-oil business growth boosted by high oil output | Reuters
UAE August non-oil business growth climbs to six-month high | Reuters
Oman reschedules some gas exports as industry struggles | Reuters
Egypt business activity expands in August at sharpest rate of 2015 | Reuters
Egypt says Zohr gas field will not undermine talks on imports from Israel | Reuters
Sisi urges Chinese partners to join Egypt’s development projects | SIS
North Iraq oil exports down in August due pipeline disruption | Reuters
Turkey’s inflation increases to 7.14 percent in August | Daily Sabah
Lira weakens after inflation accelerates in August | Bloomberg
Turkey’s Erdogan asks G20 members to prepare investment strategies | Reuters