Egypt’s annual urban inflation jumps to 35.7% in February

Egypt’s annual urban inflation jumps to 35.7% in February
The increase in inflation comes well before a surge expected to result from last week’s devaluation of the currency. Shutterstock
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Updated 11 March 2024

Egypt’s annual urban inflation jumps to 35.7% in February

Egypt’s annual urban inflation jumps to 35.7% in February

CAIRO: Egypt’s annual urban consumer price inflation jumped to 35.7 percent in February from 29.8 percent in January, driven mainly by a rise in food and beverage prices, data from statistics agency CAPMAS showed on Sunday.
The increase in inflation comes well before a surge expected to result from last week’s devaluation of the currency. The central bank on Wednesday allowed the Egyptian pound to fall to about 50 to the dollar from 30.85, where it had been fixed for the past 12 months.
A poll of 14 analysts had expected February inflation to slow to a median 25.1 percent. Before February, Egypt’s inflation rate had been falling from a historic high of 38.0 percent in September.
Month-on-month, prices rose by 11.4 percent in February, up from just 1.6 percent in January. Food prices leapt by 15.9 percent, up from 1.4 percent in January.
“The sharp rise in the annual reading was fuelled by a surge in monthly inflation of both food (F&B) and non-food items and was in spite of the favourable base year contribution of -5.5 percent,” Allen Sandeep of Naeem Brokerage said in a note.
Core inflation, which excludes fuel and some volatile food items, rose to 35.1 percent in February from 29 percent in January, the central bank said later on Sunday.
Meanwhile, Egypt has taken major steps toward lowering its budget deficit by selling real estate as well as agreeing a support package with the International Monetary Fund, its finance minister said on Sunday.
Egypt’s primary budget surplus will rise to above 3.5 percent in the fiscal year that will begin in July, Finance Minister Mohamed Maait told a news conference on Sunday.
The primary surplus does not include interest payments, which in the seven months to end-January accounted for well over half of all expenditures and have kept Egypt deeply in deficit.
The finance ministry last month forecast a primary general budget surplus equal to 2.5 percent of gross domestic product for the current fiscal 2023/24 year.
Egypt agreed in February to sell the development rights to Ras al-Hikma, a prime Mediterranean resort destination, to Abu Dhabi for $24 billion and expects more than $20 billion from an IMF-led package signed last Wednesday.
The package includes $3 billion in funding from the World Bank, Maait said.
“The positive part is the Ras al-Hikma deal, a not-small portion of which will enter the general budget in pounds,” Mohamed Maait told reporters. “The total deficit will be less than targeted because of Ras al-Hikma.”
Maait said the budget had been hurt by a drop in Suez Canal and other revenue, while expenditure had surged because of a sliding currency and higher interest rates on Egypt's debts.

Saudi fashion industry projected to expand by 48% by 2025

Saudi fashion industry projected to expand by 48% by 2025
Updated 16 sec ago

Saudi fashion industry projected to expand by 48% by 2025

Saudi fashion industry projected to expand by 48% by 2025

RIYADH: Saudi Arabia’s fashion industry is set to post a cumulative annual growth of 48 percent from 2021 to 2025 as the Kingdom diversifies its economy, a report said. 

In its latest quarterly release, the Small and Medium Enterprises General Authority said that Saudi Arabia’s Fashion Commission is playing a crucial role in building a more robust ecosystem to propel the sector’s growth. 

The authority, also known as Monsha’at, revealed that the fashion industry contributed 1.4 percent of the Kingdom’s gross domestic product in 2022. 

The report added that the total value of the fashion sector in Saudi Arabia, including international brands, stood at $24.6 billion in 2022. 

On the other hand, the domestic fashion industry in the Kingdom was worth $12.5 billion in 2022. 

“Saudi Arabia has embarked on a profound transformation across multiple industries. This renaissance spans architecture, music, film, art, food, and more. Through diverse initiatives at the Fashion Commission, we are revolutionizing the fashion sector and elevating our talents to global stages while adhering to the core pillars that drive growth and sustainability,” said Burak Cakmak, CEO of the Fashion Commission. 

He added: “Due to several strategic initiatives that fostered a dynamic ecosystem of creativity and business acumen, the growth of the fashion industry in Saudi Arabia over the past few years has been unprecedented.” 

Cakmak said that developing local talent in the Kingdom is one of the crucial missions of the Fashion Commission. 

He added that the organization has initiated comprehensive educational programs, workshops, and mentorship opportunities to develop the growth of Saudi nationals in the sector. 

The official also noted that the commission assists small and medium enterprises operating in the sector in growing and expanding their businesses. 

“We also advance the industry by providing essential support to entrepreneurs and SMEs, offering assistance and resources that help businesses scale. Regulatory frameworks are established and enforced to ensure ethical practices and sustainability, while cultural preservation initiatives highlight Saudi heritage, promoting it both locally and globally,” said Cakmark. 

The Monsha’at report added that the fashion industry in Saudi Arabia has employed over 230,000 people as of 2022, and 52 percent of the workforce is female. 

The authority revealed that the women’s apparel market in the Kingdom will witness a 20 percent growth by 2027, while the men’s market is set to expand by 27 percent during the same period. 

Cakmak added that participation in international fashion events by Saudi companies will help affirm the place of the Kingdom in the global arena. 

“Market expansion efforts, including marketing campaigns and participation in international fashion events, further enhance the visibility and competitiveness of Saudi fashion brands. All of these are core strategic pillars that effectively nurture a vibrant, dynamic, and globally competitive fashion industry in the Kingdom,” Cakmak noted. 

He concluded: “We believe that the future of Saudi fashion lies in the hands of our talented designers and visionary entrepreneurs. As we continue to support and nurture these individuals, we are confident that the Kingdom’s fashion industry will continue to flourish.” 

S&P reaffirms Bahrain’s credit rating amid fiscal challenges; outlook stable

S&P reaffirms Bahrain’s credit rating amid fiscal challenges; outlook stable
Updated 26 May 2024

S&P reaffirms Bahrain’s credit rating amid fiscal challenges; outlook stable

S&P reaffirms Bahrain’s credit rating amid fiscal challenges; outlook stable

RIYADH: Bahrain’s commitment to fiscal consolidation has witnessed S&P Global Ratings reaffirm its “B+/B” credit standing with a stable outlook despite challenges in 2023. 

However, the agency added that the transfer and convertibility assessment on the Gulf state remains “BB-.” It also anticipated structural reforms aimed at strengthening the non-oil revenue base, albeit at a slower pace. 

In its report, S&P said that the stable outlook reflects the expectation that Bahrain will persist in implementing measures to reduce its budget deficit, possibly benefiting from additional support from other Gulf Cooperation Council sovereigns if necessary. 

Conversely, the ratings could improve if Bahrain’s fiscal situation exceeds expectations, leading to a reduction in net debt relative to gross domestic product, or if current account surpluses widen, bolstering the country’s external position, according to the study. 

However, potential downside risks include a significant increase in government debt or a sharp decline in foreign currency reserves, which could hinder debt servicing and monetary policy effectiveness. 

“We could lower the ratings if the government’s net debt and debt-servicing burden increased significantly beyond our assumptions, presenting funding challenges. We could also take a negative rating action if foreign currency reserves declined sharply, limiting the government’s ability to service its external debt and weighing on monetary policy effectiveness,” the report said. 

On the other hand, the rating agency outlined an optimistic scenario for Bahrain, stating that it might upgrade the country’s standing if the government surpasses expectations by substantially reducing net debt relative to GDP through improved budgetary performance. 

Additionally, the ratings could increase if the current account surpluses are expanded significantly and consistently enhance the island state’s external position. 

The agency noted that its assessment is based on the anticipation that the Bahraini government will fortify its financial stance up to 2027, notwithstanding the considerable deficit expansion in 2023. 

It added that the shortfall experienced last year was primarily influenced by elevated interest rates, a one-off lump sum social support program, and an upward adjustment in pensioners’ inflationary allowance that will continue into 2024. 

Considering this initial setback, S&P foresees broader fiscal deficits averaging 4.4 percent of GDP from 2024 to 2027, compared to 3.8 percent in its prior evaluation. 

“A decline in oil production due to ongoing maintenance at the Abu Safa oil field also affects our revenue assumptions. However, we believe the government will continue pursuing fiscal and structural reforms to strengthen its non-oil revenue base, allowing for continued, albeit slower, fiscal consolidation over our forecast horizon to 2027,” the agency said in its report. 

Moreover, S&P assumed that Bahrain would receive the remaining $2.8 billion of the $10.2 billion GCC support package pledged by Saudi Arabia, the UAE, and Kuwait in 2018, and there remains potential for additional financial support beyond the program’s expiration at year-end 2024 if needed. 

“These interest-free loans have historically covered about 50 percent of the government’s gross external financing needs, although we note disbursements are not tied to, and do not necessarily align with, Bahrain’s external debt repayments,” the agency said. 

It further highlighted that Bahrain encounters annual external debt redemptions ranging from $2.0 billion to $2.5 billion, equivalent to 5 percent of GDP, stemming from a mix of Eurobond and sukuk issuances. 

In February, S&P explained that Bahrain successfully raised $2 billion by issuing a seven-year, $1 billion sukuk at 6.0 percent and a 12-year, $1 billion conventional bond at 7.5 percent. 

“We understand the issuance was met by strong investor demand, supporting more favorable pricing dynamics. In our base-case, we assume Bahrain will maintain strong access to international capital market funding,” it added. 

It explained that the country’s relatively diverse economy, proximity to Saudi Arabia’s market, robust financial sector oversight, and educated workforce provide a foundation for resilience. However, stagnant GDP per capita levels, adjusted for population growth, suggest underlying challenges in achieving broad-based economic prosperity. 

“However, when GDP performance from 2017-2027 is adjusted for population levels, GDP per capita levels are largely flat, suggesting that labor supply, rather than productivity, remains the key growth spur. We view Bahrain as having a relatively wealthy economy and estimate GDP per capita at $27,58 in 2024,” it said. 


Saudi drilling firm ADES secures 6 onshore contracts at $645.3m in Kuwait 

Saudi drilling firm ADES secures 6 onshore contracts at $645.3m in Kuwait 
Updated 26 May 2024

Saudi drilling firm ADES secures 6 onshore contracts at $645.3m in Kuwait 

Saudi drilling firm ADES secures 6 onshore contracts at $645.3m in Kuwait 

RIYADH: Saudi exploration service provider ADES Holding Co. has secured a SR2.42 billion ($645.3 million) deal for six onshore drilling contracts with Kuwait Oil Co., marking an expansion of its operations. 

ADES specified that the award includes new agreements for four existing operating rigs in Kuwait and two newly constructed units, according to a release to Tadawul. 

The contracts are slated to commence in the second and third quarters of 2025, with a firm five-year duration and an optional one-year extension. 

Mohamed Farouk, CEO of ADES Holding, said: “Securing such long-term contracts not only adds to the sustainability of our backlog and visibility of our business but is also a testament to ADES’ exceptional safety and operational performance, which will see us triple the size of our contracted fleet in Kuwait from four to 12 rigs upon deployment in 2025.”  

He added: “With these new awards, ADES has further solidified its position in the niche Kuwaiti onshore market, characterized by high barriers to entry and deep drilling deployments where ADES has consistently proven its abilities.” 

All six contracts are designated for deep drilling rigs in the 3,000-horsepower category, a niche market segment experiencing notable growth in Kuwait. 

The estimated backlog for these contracts stands at SR2.42 billion, encompassing both the firm and optional periods. 

In just 24 months, the company has seen a three-fold increase in its contracted fleet with Kuwait Oil Co. 

This growth trajectory is particularly striking, rising from four rigs in early 2023 to an anticipated 12 rigs by 2025. 

ADES operates 10 onshore rigs with KOC in Kuwait, emphasizing the company’s strengthened presence and strategic alignment with Kuwait’s energy sector objectives. 

In May, ADES expanded its regional footprint by sealing two contracts worth SR511 million, highlighting its growing influence in the oil and gas sector. 

The company signed a deal with TotalEnergies to operate an offshore drilling platform in Qatar valued at up to SR350 million. The agreement includes a mandatory one-year period with an option to extend it for up to an additional 18 months, according to a bourse filing.  

Operations are slated to begin in the second half of 2024. The company emphasized that no related parties were involved in this agreement. 

Moreover, ADES announced in a separate release that it was awarded a 21-month contract to employ an elevated platform in the Gulf of Suez. The company received a direct award letter from the Suez Oil Co, also known as SUCO, in Egypt, with operations expected to commence in the coming weeks. In a statement on Tadawul, the company disclosed that the deal is valued at SR161 million. 

This new engagement in Egypt is part of ADES’s broader regional strategy to reactivate its operations. It follows recent contracts in Thailand and Qatar, bringing the total number of reactivated platforms to three of the five recently suspended in Saudi Arabia. 

Saudi Arabia to propel global sustainable development through AI, says finance minister

Saudi Arabia to propel global sustainable development through AI, says finance minister
Updated 26 May 2024

Saudi Arabia to propel global sustainable development through AI, says finance minister

Saudi Arabia to propel global sustainable development through AI, says finance minister

RIYADH: Saudi Arabia is on track to help propel sustainable development globally through its pivotal role in artificial intelligence, according to the Kingdom’s finance minister. 

In a session titled “AI and Development: Challenges and Opportunities” at the third meeting of G7 finance ministers and central bank governors under the Italian presidency, held last week in Stresa, Italy, Mohammed Al-Jadaan explained that the Kingdom is committed to advancing technology, particularly AI, to foster inclusive growth, according to a statement.  

This aligns with Saudi Arabia’s National Strategy for Data and AI, which aims to establish the Kingdom as a global tech leader by 2030. 

Additionally, the minister participated in a session titled “Addressing Financing Needs of Vulnerable Countries,” where he stressed the potential of a proposed multidimensional approach to dealing with debt vulnerabilities.  

He underscored that this strategy aims to create fiscal space, improve resilience, and progress toward the Sustainable Development Goals.  

In addition, Al-Jadaan also participated in a session titled “Initiatives for Development with a Focus on Africa.” 

In this meeting, the minister shed light on how Africa has great potential, represented by its ambitious people, young population, and rich natural resources.  

Furthermore, the finance minister joined a session titled “Cross-Border Payments,” where he highlighted the G20’s agreement under the Saudi Presidency in 2020 on a clear roadmap to support cross-border payments. 

Al-Jadaan elaborated that this roadmap led to the establishment of the Cross-Border Payments Coordination Group, which collaborates with international organizations to enhance global payments. He stressed the importance of building on current efforts in this area. 

On the sidelines of the meeting, Al-Jadaan met with several ministers and leaders of global organizations to discuss key economic and financial developments and topics of mutual interest. 

Throughout the three-day meeting, the G7 finance ministers and central bank governors exchanged views on the global implications of AI, ongoing development initiatives, and cross-border payments. They agreed to continue close cooperation in relevant multilateral fora, such as the G20. 

During the sessions, the ministers and governors reaffirmed their commitment to multilateral cooperation to promote sustainable development, recognizing the multiple challenges requiring a coordinated response from the international community. 

Fitch upgrades Saudi Electricity Co. to ‘A+’ citing strong govt support

Fitch upgrades Saudi Electricity Co. to ‘A+’ citing strong govt support
Updated 26 May 2024

Fitch upgrades Saudi Electricity Co. to ‘A+’ citing strong govt support

Fitch upgrades Saudi Electricity Co. to ‘A+’ citing strong govt support

RIYADH: Saudi Electricity Co. received an upgrade from Fitch Ratings, raising its long-term foreign and local currency issuer default rating to “A+” from “A,” citing government support. 

In its latest report, the agency also upgraded the company’s national long-term rating to “AAA” from “AA,” with a stable outlook. 

According to Fitch, SEC’s standalone credit profile remains at “bbb” due to its dominant position in Saudi Arabia’s electricity market. 

“The upgrade follows our reassessment of SEC’s links with the Saudi Arabian government under Fitch’s recently updated Government-Related Entities Rating Criteria. SEC’s ratings are now equalized with those of Saudi Arabia (A+/Stable),” stated Fitch in the report. 

According to the US-based agency, an “A+” rating denotes expectations of low default risk and a strong capacity to meet financial commitments. 

On the other hand, a “bbb” rating indicates that while default risk expectations are currently low and the capacity to meet financial commitments is adequate, adverse business or economic conditions could impair this capacity. 

Commenting on the upgrade, Khaled bin Hamad Al-Gnoon, CEO of SEC, said the rating action is a testament to the company’s efforts and investments to bolster the reliability and efficiency of Saudi Arabia’s electrical grid. 

“This improved rating is reflective of our best-in-class governance, our close alignment with the Ministry of Energy and Saudi Arabia’s decarbonization strategy, and our solid financial profile,” said Al-Gnoon.  

He added: “We are committed to maintaining our service excellence and fulfilling our pivotal role in powering Saudi Arabia’s future.”  

In a statement, the company said the upgrade was driven by several key factors, including recognition of SEC’s robust decision-making and strong government support. 

Additionally, the upgrade acknowledges SEC’s stable financial profile, bolstered by the conversion of SR168 billion ($44.80 billion) of liabilities into equity-like instruments, the company’s leverage headroom, and strong cash flow visibility. 

Earlier this month, SEC reported a net profit of SR897 million for the first quarter of 2024, marking an 87 percent increase compared to the same period the previous year.