Corridor rates lifted IN A MOVE aimed at curbing spiralling inflation, the Central Bank of Egypt (CBE) decided on Monday to increase the interest rate on overnight deposits and loans by 0.5 per cent to reach 9.5 and 11.5 per cent, respectively. This is the second time CBE raises its key rates in almost six weeks, after increasing them in February for the first time in one year. Corridor rates are considered the benchmark for all deposit and lending rates in the Egyptian banking sector, and thus the raise may lead to an increase in bank deposit rates which recently hit lows of around 5-6 per cent. CBE's Monetary Policy Committee (MPC) attributed the decision to inflation jumping to 10.5 per cent in January and 12.1 per cent in February, levels which the CBE called "unacceptable". Inflation rates are expected to increase further in the coming period. While the hike in inflation was mainly fed by an increase in food prices, an MPC press release pointed out that the value of other commodities are being pushed upwards in a domino-like effect. The committee also expected the rise in international food costs to further push local prices. However, the MPC predicted that the economy will maintain its current growth rates -- believed to be one of the main drivers of inflation. Gas export adjustments THE MINISTRY of Petroleum announced earlier this week that the price of exporting liquefied natural gas (LNG) is estimated at $5 btu (British thermal unit), and that the price ranges from $8 btu to $11 btu for spot LNG cargos due to hikes in the international value of petroleum. The ministry issued the statement in response to sharp criticism that NG exports to Israel are under-priced. Meanwhile, provoked by Israeli massacres in the Gaza Strip, many voices in the national as well as opposition press have demanded a freeze in gas exports to Israel. According to Chairman of the Egyptian Natural Gas Holding Company (EGAS) Mahmoud Latif, gas exports to Israel are still in the experimental phase and LNG exports to Israel will be estimated at 150 million cubic feet annually. Although Latif declined to reveal the exact price of selling gas to Israel, he indicated that the process covers cost and results in a good profit for Egypt. For his part, EGAS former chairman Sherif Ismail indicated that all natural gas export agreements are subject to price adjustment and modification. A good example was modifying the agreement with Spain which resulted in doubling the price of exported gas. "Gas agreements are concluded in complete secrecy," Ismail stated, "and there is no such a thing as a fixed price for selling gas because these are long-term agreements which are governed by different factors and variables." In the meantime, the re-pricing mechanism in some gas export agreements which were adopted by the ministry since 2006 will result in surplus revenues estimated at $18 billion in the next 20 years. A significant surplus in hard currency will also be accomplished thanks to specifying $2.65 btu as the maximum price for purchasing gas from the foreign partner in Egypt, no matter how high petroleum prices reach. "Estimated natural gas reserves are 72.3 trillion cubic feet (tcf) which will increase to 75 tcf by the end of this year when discovered fields become operational," noted Latif. He added that NG production has tripled since 2001, reaching 50 million tonnes equivalent in 2007, and that 85 per cent of produced gas is consumed by the three major sectors -- electricity, industry and petrochemicals. "NG production has to increase by 10 billion cubic feet by 2011 to keep the local market well-supplied," pointed out Latif. He continued that a national strategy of switching to natural gas in different applications has been adopted, and that meeting the local market's ever-growing gas needs has been prioritised over exporting. Tougher draft penalties TO COPE with both local and international economic changes, the government will apply a new legislative strategy to control and regulate the domestic markets. Minister of Trade and Industry Rachid Mohamed Rachid last week declared that the new strategy includes the amendment of 12 laws relating to internal trade. Before being issued, the new amendments are expected to be discussed with the business community and civil society representatives. Moreover, the strategy includes the establishment of an Egyptian national authority responsible for supervising the production and trading process of food products to guarantee safety. Rachid added that a meeting is scheduled next week with the ministers of agriculture and health to approve the final draft of a legislation regulating the National Authority for Food Safety. The new laws aim to stiffen penalties for commercial fraud and illegal acts. According to Rachid, the amendments will also give the minister of trade and industry the right to close down commercial and industrial shops if they violate health safety regulations. He added that the cabinet recently approved amendments to the anti-monopoly and competition law, which increase fines for monopoly acts from LE10 million to LE50 million. Factory tally rising SINCE President Hosni Mubarak's 2005 electoral campaign promise to build 1,000 factories, some 370 large factories have gone up or expanded. These figures were revealed in a recent report by the Industrial Development Authority (IDA) on investments in the industrial sector. Total investments in these factories are estimated at LE24.3 billion and provide 100,000 job opportunities, the report added. Although the target until February 2008 was to establish 366 large factories, only 213 new factories were built while 157 existing factories made expansions. Minister of Trade and Industry Rachid Mohamed Rachid said that the tally for medium-size factories is 223, with total investments worth LE1.7 billion and 20,000 job opportunities. According to Rachid, the ministry's strategy is to encourage investors to build new factories, and improve the investment climate in Egypt to attract more investors in the industrial sector. Promoting Italy cooperation THE EGYPTIAN Federation of Industries (EFI) is expected to sign a bilateral agreement with its Italian counterpart next month to boost economic cooperation between the two sides. The agreement is scheduled to be signed in Cairo during a visit by a top Italian delegation on 8-10 April. The Italian group will include 200 businessmen and representatives of large Italian companies in the fields of textiles, leather, furniture, agricultural products, vehicles and construction materials. The EFI will organise a workshop during the visit to discuss investment possibilities and prospects for economic cooperation between both countries. A delegation from EFI was recently in Italy to promote Egypt's great potential as an investment destination. The visit also aimed to open new markets for Egyptian products, attract new investors, provide technical assistance and exchange experiences between businessmen on both sides.
