Sudan approved for debt relief, $2.5 billion funding by IMF

Sudan ended subsidies for gasoline and diesel earlier this month, leading to a doubling of prices. (Reuters)
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Updated 30 June 2021

Sudan approved for debt relief, $2.5 billion funding by IMF

  • Country stuck in deep economic crisis
  • Government struggling to finance imports

KHARTOUM: Sudan received approval from the International Monetary Fund on Tuesday for relief on more than $56 billion in debt and new IMF funding of $2.5 billion over three years.
The IMF has accepted the East African country into the Highly Indebted Poor Countries (HIPC) initiative based on the country’s commitment to macroeconomic reforms, it said, meaning Sudan can finally access debt forgiveness and new funds. Sudan is the penultimate candidate for the IMF-World Bank program and by far the largest debt holder.
Now at the program’s “decision point,” Sudan will see its external debt drop to about $30 billion relatively soon. It will then fall to $6 billion when Sudan achieves irrevocable debt relief after an estimated three years, at the “completion point,” IMF mission head Carol Baker said.
Analysts said the HIPC decision came unusually quickly, a product of international goodwill toward Sudan’s civilian leaders sharing power with the military during a fragile political transition and acknowledgement of rapid, painful economic reforms.
“It’s not over yet but this is a really significant milestone on the country’s path to a more prosperous future,” said Ian Clark, partner at legal firm White & Case, which is advising the government on debt restructuring through the HIPC with financial adviser Lazard.
Deepened by decades of isolation and sanctions, Sudan’s economic crisis includes inflation approaching 400 percent, shortages of basic goods and services and a spike in food insecurity.
Recent economic reforms include the removal of fuel subsidies and a sharp exchange rate devaluation under an IMF-monitored program required to enter HIPC.
Another condition for accessing HIPC was removal from the US list of state sponsors of terrorism, achieved last year after Sudan agreed to provide compensation to victims of attacks and normalize relations with Israel.
“This is a big day for Sudan and reaffirms that all the efforts and sacrifices of the Sudanese people are recognized and rewarded,” Prime Minister Abdalla Hamdok said in a statement.
NO PANACEA
Under Omar Al-Bashir, ousted as president after a popular uprising in April 2019, Sudan accumulated massive arrears, or unpaid interest and penalties, that grew to account for 85 percent of the country’s total debt. Its power-sharing deal is due to last until the end of 2023.
Sudan is still calculating its full debt, but in a March report the IMF said the country owed $19 billion to Paris Club countries and the same to non-Paris Club countries, including Kuwait, Saudi Arabia and China as of the end of 2019. Its large commercial debts of at least $6 billion are roughly matched by what it owed to multilateral organizations.
Sudan’s arrears to the World Bank and African Development Bank were settled earlier this year, and the IMF announced on Tuesday that its arrears were also resolved with help from a French bridge loan.
Next month, the Paris Club will decide on the proportion of debt it will forgive, expected around 70 percent, and a comparable agreement is expected to apply to other creditors, subject to individual negotiations.
The HIPC program has been far from a panacea: Three of its graduates – Ethiopia, Zambia and Chad – are currently applying for debt relief under the G20 common framework program launched in 2020. Others such as Mozambique and Congo have also been forced to restructure.

NEW FINANCING
The $2.5 billion in new funding is a combination of grants and cheap loans that the IMF calls an “extended credit facility.” This will provide Sudan much needed direct financing but requires that Sudan push ahead with reforms also required for permanent debt relief.
Some $1.4 billion of the total was dispersed immediately, the IMF said, in order to repay France. The remainder will be disbursed over the next 39 months.
“We are looking to make space for private sector-led growth to create jobs,” including by reducing the country’s need to print money, said Baker.
Sudan must demonstrate it has achieved macroeconomic stability and improved governance and that it has used the new “fiscal breathing space” to reduce poverty, finance ministry senior adviser Magdi Amin told Reuters. Khartoum cannot fall back into arrears on its remaining debt for the relief to be made permanent, he added.
That is crucial for Sudan’s over-burdened government, which Baker said inherited reserves at less than a week’s worth of imports from the Bashir regime. It routinely struggles to import fuel, causing frequent power cuts.
The IMF estimated in April that Sudan needs more than $7 billion in external financing over the next two years.
The reforms so far have caused food and transportation costs to surge, forcing Sudanese people to make sacrifices. There are frequent protests, including demonstrations planned on Wednesday.
“It’s imperative that (the government) communicate properly to the population ... on this so people don’t look up and just see the pain,” said Jonas Horner, Sudan analyst at the International Crisis Group.

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Agthia saves $26.4 million in 18 months using cost optimization measures

Updated 19 August 2022

Agthia saves $26.4 million in 18 months using cost optimization measures

  • Group plans to expand into consumer business and have a consumer-centric mix of 75 percent of revenues

DUBAI: Agthia, a food and beverage company based in Abu Dhabi, has saved 97 million dirhams ($26.4 million) in 18 months as part of its Strategy 2025 program.

Alan Smith, CEO of Agthia, told Arab News that the company had committed to saving 200 million dirhams over five years as part of its long-term strategy envisaged in 2021.

“The company saved 97 million dirhams in just 18 months,” said a beaming Smith, adding that the company plans to become a leader in the Middle East, North Africa and Pakistan by 2025.

The group plans to expand into consumer business and have a consumer-centric mix of 75 percent of revenues.

Agthia Group CEO Alan Smith. (Supplied)

In July 2022, the company’s board approved the acquisition of a strategic 60 percent stake in Auf Group, a specialized healthy snacks and coffee manufacturer and retailer in Egypt.

Agthia has also received its board’s approval to acquire 60 percent of Egyptian coffee maker Auf Group as it expanded its footprint in the North African country last month.

Growth crossroads

The company acquired five companies in 2021, which included Al Foah Dates in the UAE, Al Faysal Bakery & Sweets in Kuwait, Nabil Foods in Jordan, Atyab in Egypt and BMB, a fully integrated food company in the UAE.

And these acquisitions contributed 73 percent of the total revenue for the six months ending June 30, 2022.

Agthia Group’s net revenue grew 51 percent year on year to 2 billion dirhams in the first half of this year, according to the company’s results.

Smith said that compared to a few years ago, Agthia’s revenue was 2 billion dirhams on a full-year basis.

BACKGROUND

The company saved 97 million dirhams in just 18 months, said Smith, adding that the company plans to become a leader in the Middle East, North Africa and Pakistan by 2025.

“I think the number is about 73 percent, so we’re very close to our long-term commitments,” he added.

Due to the seasonality advantages the company sees in the snacking business and the growth in the protein business. Smith said the contribution of the consumer business division to the overall revenue will be at least 75 percent on a full-year basis, if not more.

Before acquiring five companies last year, Agthia’s revenue was split 50-50 between consumers and agribusinesses.

Besides the brands acquired in 2021, the consumer business includes Yoplait dairy products and a slew of water and beverage brands such as Al Ain and Al Bayan. On the other hand, the agribusiness produces Grand Mills flour and Agrivita animal feed.

“What we are seeing in quarter two is the consolidation of all five acquisitions we did last year,” he said.

Optimization opportunity

According to Smith, Agthia generates 50 percent of its revenue from the UAE and the rest from other parts of the world.

The company has also taken cost optimization measures to increase its revenue and improve profitability. For instance, the confectionery and healthy food brand BMB had a manufacturing facility each in Dubai Investment Park and Jebel Ali.

After the acquisition, Agthia closed one of BMB’s facili- ties and consolidate it into an existing Agthia manufacturing facility.

“It was a rented facility that we shut down and moved that production into Agthia’s own facility,” Smith said.

Smith said Agthia’s financial results and Strategic 2025 plan are on track despite market volatility.

Agthia is currently setting up a new manufacturing unit in Saudi Arabia for Nabil Foods, the firm’s protein brand, to meet the growing demand for the product line from local customers. Earlier this year, the company announced the greenfield investment of 90 million dirhams to set up the facility.

According to Smith, the facility’s design is completed, and the scope of work for tendering has been outlined. He is now awaiting necessary approvals for the Saudi manufacturing facility from the competent authority.

With this project, Agthia will be able to increase its footprint in the Kingdom and support its strategy to become one of the most prominent players in the Middle East and North Africa consumer packaged goods market.

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UK’s Liz Truss says defining mission will be reviving the economy

Updated 19 August 2022

UK’s Liz Truss says defining mission will be reviving the economy

LONDON: The frontrunner to be Britain’s next prime minister Liz Truss said her government’s defining mission would be to revive the economy as she set out a series of measures to help parts of northern England.
Britain’s economic performance has lagged behind those of the United States, Italy and France in recovering from the COVID-19 pandemic. The economy is expected to enter a long downturn at the end of the year amid surging inflation and rising interest rates.
“The defining mission of my government will be to get our economy growing again, cutting taxes to put more money into the pockets of hardworking people,” Truss said.
Outgoing Prime Minister Boris Johnson had said reducing regional economic inequality was his main goal. But public spending in the north of England fell behind the national average in the first two years of his government, research by the Institute for Public Policy Research has shown.
Truss said she was committed to the current government’s goal of reducing economic inequalities but would do so in a “Conservative way,” interpreted as meaning a focus on tax cuts and deregulation.
Speaking ahead of election hustings in Manchester in northern England on Friday, Truss pledged to provide more devolution, to ensure poorer areas receive the government funding they need, and to build two new vocational colleges in the north of England that will be “the vocational equivalent of Oxford and Cambridge,” dubbed “Voxbridge.”
Truss has portrayed herself as a radical insurgent who would overturn the current failed orthodoxy and has proposed to reverse more than £30 billion ($36 billion) of tax rises.

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Dubai sees air travel surge, expects World Cup boost

Updated 17 August 2022

Dubai sees air travel surge, expects World Cup boost

  • The airport handled 160 percent more traffic over the past six months compared to the same period last year

DUBAI: Dubai International Airport saw a surge in passengers over the first half of 2022 as pandemic restrictions eased and the upcoming FIFA World Cup in Qatar will further boost traffic to the city-state’s second airfield, its chief executive said Wednesday.

Paul Griffiths, who oversees the world’s busiest airport for international travel, told The Associated Press that the airport handled 160 percent more traffic over the past six months compared to the same period last year, part of an air travel rebound around the world.

The nearly 28 million people who traveled through the airport over the past six months represent some 70 percent of the airport’s pre-pandemic levels, even as Dubai’s key source market of China remains closed due to severe pandemic restrictions. Griffiths said he expects the airport’s traffic to return to pre-pandemic levels by the end of next year.

“It’s a very, very welcome surge of traffic,” Griffiths said.

The first World Cup in the Middle East, he added, will send foreign soccer fans flocking to Al-Maktoum International Airport at Dubai World Central, or DWC. From there, they will travel daily to Qatar, a tiny neighbor that faces a hotel squeeze.

“We’ve actually seen a huge demand at DWC for slot filings for airlines wanting to operate a shuttle service,” he said. “I think the city has a lot to offer and a lot to gain from the World Cup.”

Among the airlines buying extra slots to shuttle soccer fans to the tournament from DWC are Qatar Airways, low-cost carrier FlyDubai and budget airline Wizz Air Abu Dhabi, he said.

During the first half of 2022, Dubai International Airport dealt with nearly 56 percent more flights than the same period in 2021, when contagious coronavirus variants clobbered the industry.

Now, in a sign of the health of the industry, Emirates said on Wednesday that it would pour billions of dollars into retrofitting much of its Airbus A380 and Boeing 777 fleet. At the height of the pandemic, the airline received a $4 billion government bailout.


Egypt’s central bank governor resigns as economic woes mount

Updated 17 August 2022

Egypt’s central bank governor resigns as economic woes mount

  • President Abdel Fattah el-Sissi accepted the resignation of Tarek Amer and named him a presidential adviser
  • The currency is under pressure, sliding in value to about 19 Egyptian pounds to the US dollar

CAIRO: Egypt’s central bank governor resigned Wednesday as the Middle East’s most populous nation struggles to curb inflation triggered by Russia’s war in Ukraine, high oil prices and a drop in tourism.
President Abdel Fattah El-Sisi accepted the resignation of Tarek Amer and named him a presidential adviser, the Egyptian leader’s office said in a statement. The brief statement offered no explanation for Amer’s resignation.
No replacement was immediately named for Amer, who had been appointed governor of the central bank in November 2015. He has been criticized for his handling of Egypt’s financial challenges.
The currency is under pressure, sliding in value to about 19 Egyptian pounds to the US dollar. That followed a central bank decision allowing the currency to depreciate by around 16 percent in March to try to stem a growing trade deficit.
“It seems there’s a lot of tensions within policymaking circles, and I think that’s ultimately what led to Mr. Amer’s resignation,” said Jason Tuvey, a senior emerging markets economist at Capital Economics.
Tuvey said there are officials that oppose devaluing the pound and instead support measures like rationing gas consumption by curbing electricity usage, which could in turn harm business activity. Amer had traditionally been seen as in the camp that supported the pound’s depreciation as a way to secure a loan from the International Monetary Fund.
The London-based Capital Economics research firm predicts that Egypt’s currency will continue to slide, reaching 25 pounds to the dollar by the end of 2024 amid sustained pressure.
The resignation of the central bank head comes after key ministries were reshuffled Saturday as the government faces mounting pressure from economic challenges. The Cabinet shake-up, which was approved by parliament in an emergency session, affected 13 ministries, including health, education, culture, local development and irrigation. The country’s minister of tourism and antiquities also was replaced.
Egypt’s expansive tourism industry, which employs millions, was hit hard by years of turmoil, the COVID-19 pandemic and then the war in Ukraine. Prior to the conflict, around a third of tourists to Egypt came from Russia.
Russia’s war has been deeply felt in other ways in Egypt, the world’s largest wheat importer that sources around 80 percent of it from the Black Sea region.
In the first weeks after the invasion of Ukraine in late February, the price of wheat and other grains skyrocketed, as did the price of fuel. Although prices have come down somewhat, the cost of grains remains at least 50 percent higher than before the pandemic in early 2020. Furthermore, the cost of shipping to export those grains through the Black Sea is high.
Inflation in the country of 103 million people reached 14.6 percent in July, increasing pressure on lower-income households and everyday necessities. Around a third of Egyptians live in poverty, according to government figures.
The World Bank notes that Egypt’s government announced an assistance package worth 130 billion pounds (more than $8 billion) just before devaluing the pound in March to alleviate the impact of rising prices. The package aimed to increase public-sector wages and pensions, as well as expand direct cash assistance programs.
Egypt’s Gulf Arab allies have come to its assistance with multibillion-dollar investments buoyed by high oil prices that have helped their bottom line.
Saudi Arabia’s sovereign wealth fund, known as the Public Investment Fund, recently established a division in Egypt that has already announced deals worth $1.3 billion with the aim of bringing in $10 billion into Egypt.

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Saudi-Uzbek trade exceeds $95m in the first half of 2022

Updated 17 August 2022

Saudi-Uzbek trade exceeds $95m in the first half of 2022

  • The two countries will bolster ties further with the signing of 12 new deals this week

RIYADH: The mutual trade between Saudi Arabia and the Republic of Uzbekistan reached $95 million in the first half of 2022, a substantial increase considering that bilateral trade barely exceeded $17 million last year.

According to a joint news statement, the value is expected to grow rapidly by the end of 2022. The numbers assume significance in the aftermath of the pandemic.

In fact, the number of Uzbek companies running on Saudi funds increased from about nine to 38 in the last five years. Of the 38, 19 are sole proprietors, and the rest are joint ventures.

The two nations will bolster the ties further by signing 12 new agreements on Wednesday and Thursday when Uzbekistan President Shavkat Mirziyoyev visits the Kingdom.

According to an Uzbek state agency, high-level talks will take place in Jeddah, where the two nations will discuss opportunities to enhance multilateral cooperation further.

The discussion will focus on the green economy, technology and digitalization, innovations, small business and entrepreneurship. 

Following the meeting, new agreements are expected to be signed in the energy, telecommunications, agriculture, chemical and petrochemical industries, besides encouraging ties in culture, sports and education.

The Kingdom has become one of the largest foreign investors in energy infrastructure and one of Uzbekistan’s most significant developers of green energy projects.

ACWA Power’s Uzbek interests

Recently, the Ministry of Energy of Uzbekistan and Saudi energy company ACWA Power signed several investment agreements for about $3 billion.

ACWA Power will develop and operate a wind energy project with a production capacity of 1,500 MW in the Karakalpakstan region of Uzbekistan.

When commissioned, the plant will become the largest of its kind in Central Asia and one of the largest wind power plants in the world. 

FASTFACTS

• The number of Uzbek companies running on Saudi funds increased from about nine to 38 in the last five years.

• Recently, the Ministry of Energy of Uzbekistan and Saudi energy company ACWA Power signed several investment agreements for about $3 billion.

• The Saudi Fund for Development has contributed to the implementation of many projects in Uzbekistan, including funding the Samarkand-Gozar Road project, with a total value of $30 million.

ACWA Power also signed an agreement to establish the 100MW Nokus wind farm project, the first renewable energy project to be implemented in partnership with Uzbekistan’s public and private sectors.

The power generating company also won a $108 million wind contract after proposing a tariff of 2.56 cents per kilowatt-hour, the lowest in Uzbekistan.

Additionally, the Ministry of Energy of Uzbekistan signed a 25-year power purchase agreement with ACWA Power to establish a combined-cycle gas turbine power plant in Shirin, located in Syrdarya, Uzbekistan. The deal amounts to $1.2 billion.

According to the statement, these projects will contribute to achieving Uzbekistan’s national goal of raising the total renewable energy generation capacity to 30 percent by 2030.

Saudi Fund for Development

Moreover, the Saudi Fund for Development has contributed to the implementation of many projects in Uzbekistan, including funding the Samarkand-Gozar Road project, with a total value of $30 million.

The fund also contributed to 20 projects in the republic, including building pumping stations and other projects involving sewage, chemicals, mining, building materials, water and agriculture.

According to the Ministry of Agriculture of Uzbekistan, the Saudi and Uzbek delegations have discussed issues of cooperation in agriculture, including the prospects for enhancing mutual trade in agricultural products.

Both parties will likely sign memorandums of cooperation in agriculture, veterinary medicine and livestock development at the meeting.

They also agreed to deepen cooperation in the agricultural sector to enhance trade in farming, livestock and other products between the countries.

After signing the memoranda, action plans will be prepared, including specific measures and areas for developing cooperation and joint projects.

The Saudi side invited the Uzbekistan delegation to attend its most prominent exhibition of the agro-industrial complex, which will be held at the end of October in Riyadh.