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Egypt Population Surge Must Be Met with Job Growth, IMF Says

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  • Egypt Population Surge Must Be Met with Job Growth, IMF Says

Egypt needs to embrace policies that strengthen the private sector and promote job growth in order to cement the gains realized from sweeping economic revival efforts, the International Monetary Fund said.

At the same time, the government can’t afford to delay in moving ahead with cuts in costly energy subsidies or risk straining the budget at a time of higher global oil prices, David Lipton, the IMF’s first deputy managing director, said late Saturday. The comments, to an audience that included Finance Minister Amr El-Garhy, came as an IMF mission is conducting the third review for the $12 billion loan program it granted Egypt in 2016.

“More than anything else, Egypt cannot delay on jobs,” Lipton said, noting that by 2028, Egypt’s working age population will increase by 20 percent — putting the labor force at 80 million. “Creating jobs for all those people has to be Egypt’s biggest economic challenge.”

Key to dealing with this issue, Lipton said, is a “less heavy footprint of the public sector in the economy, especially in business and commerce, to clear away room for the growth of the private sector and to relieve entrepreneurs from the unwinnable match-up of competing with the public sector.”

Growth could rise to 6-8 percent “if this country can tap the potential of its young people—by bringing unemployment and labor force participation to the level of many other emerging market,” he said. “That would be a transformation. It would mean improving living standards for large segments of the population.”

With the IMF’s support, Egypt in 2016 has floated its currency, raised taxes, slashed subsidies and nearly halted increases in public wages — measures the government said were necessarily to avoid economic meltdown in 2016.

Growth has since recovered to more than 5 percent, the budget deficit has dropped, and over $23 billion in foreign money has flowed to the country’s high-yielding Treasury bills, highlighting the return of investor confidence. The benchmark EGX30 equities index rose 20.44 percent since the beginning of 2018, the third-best performer of more than 100 gauges tracked by Bloomberg.

Even with the gains, the government needs to push ahead.

Under its IMF-backed economic overhaul plan, Egypt aims to completely scrap the bulk of energy subsidies in the nation of over 96 million by mid-2019. The target, however, was set in 2016, when the price of Brent crude was significantly lower than $68.59 per barrel it averaged in the past four months.

“Public finances certainly are on a firmer footing, but public debt remains very high,” Lipton said “Delays in following through on the reform of energy subsidies could again leave the budget at risk from higher global oil prices.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

South Africa’s iGas, PetroSA and Strategic Fuel Fund Merge to Create South African National Petroleum Company

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The South African Department of Mineral Resources and Energy (DMRE) has announced the merger of Central Energy Fund (CEF) subsidiaries iGas, PetroSA and the Strategic Fuel Fund (SFF).

The merger will be effective from 1 April 2021 and the new company will be called the South African National Petroleum Company.

The merger, driven by the pursuit of implementing a new company that has a streamlined operating model via the development of a shared services system and a common information platform, comes a few months after cabinet approval and the confirmation that PetroSA had incurred losses of R20 billion since 2014.

Additional factors which prompted the move included the determination to strengthen PetroSA which had not had a permanent CEO in five years prior to the appointment of CEO Ishmael Poolo last and, had become majorly ungainful since its failure to secure gas for the gas-to-liquids refinery project in Mossel Bay.

While the merger deadline has been set, the portfolio committee expressed reservations to the department’s likelihood of meeting the deadline, considering the existing legislative regime, pending issues raised in the SFF and PetroSA forensic reports, as well as PetroSA’s current insolvency and liquidity challenges, the official press statement on the briefing revealed.

“South Africa’s energy sector is entering a new dawn,” said NJ Ayuk, Executive Chairman of the African Energy Chamber. “With gas discoveries off the coast and the announcement of the REIPPP programme bid window 5 and 6 on the horizon, now is the most opportune time for the merger of the CEF subsidiaries. Of course, it is not an easy task and delays may be anticipated but, this move signals a real change towards a meaningful strategy that will not only be beneficial to the DMRE but to potential investors and local development as well.”

The African Energy Chamber welcomes this move and acknowledges that this is yet another step supporting the country’s determination to restarting the engines of sustainable growth and the transformation of energy policy and infrastructure.

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Crude Oil

Crude Oil Hits $71.34 After Saudi Largest Oil Facilities Were Attacked

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Brent Crude Oil Rises to $71.34 Following Missile Attack on Saudi Largest Oil Facilities

Brent crude, against which Nigerian oil is priced, jumped to $71.34 a barrel on Monday during the Asian trading session following a report that Saudi Arabia’s largest oil facilities were attacked by missiles and drones fired on Sunday by Houthi military in Yemen.

On Monday, the Saudi energy ministry said one of the world’s largest offshore oil loading facilities at Ras Tanura was attacked and a ballistic missile targeted Saudi Aramco facilities.

One of the petroleum tank areas at the Ras Tanura Port in the Eastern Region, one of the largest oil ports in the world, was attacked this morning by a drone, coming from the sea,” the ministry said in a statement released by the official Saudi Press Agency.

It also stated that shrapnel from a ballistic missile dropped near Aramco’s residential compound in Eastern Dhahran.

Such acts of sabotage do not only target the Kingdom of Saudi Arabia, but also the security and stability of energy supplies to the world, and therefore, the global economy,” a ministry spokesman said in a statement on state media.

Oil price surged because the market interpreted the occurrence as supply sabotage given Saudi is the largest OPEC producer. A decline in supply is positive for the oil industry.

However, Brent crude oil pulled back to $69.49 per barrel at 12:34 pm Nigerian time because of the $1.9 trillion stimulus packed passed in the U.S.

Market experts are projecting that the stimulus will boost the United States economy and support U.S crude oil producers in the near-term, this they expect to boost crude oil production from share and disrupt OPEC strategy.

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Crude Oil

A Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

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Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

Two residents from the eastern city of Dhahran, Saudi Arabia, on Sunday said they heard a loud blast, but they are yet to know the cause, according to a Reuters report.

Saudi’s Eastern province is home to the kingdom’s largest crude oil production and export facilities of Saudi Aramco.

A blast in any of the facilities in that region could hurt global oil supplies and bolster oil prices above $70 per barrel in the first half of the year.

One of the residents said the explosion took place around 8:30 pm Saudi time while the other resident claimed the time was around 8:00 pm.

However, Saudi authorities are yet to confirm or respond to the story.

 

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