Sufficient aid will be available to Egypt through external bilateral assistance from the Gulf Cooperation Council (GCC), according to a Thursday report by the Bank of America Merrill Lynch. The report also expects no near-term International Monetary Fund (IMF) engagement with Egypt. Tightened liquidity suggests a need for the GCC aid in the second half of 2014 to support the Egyptian pound and ease external funding pressures. Authorities appear to be focused on securing direct GCC fiscal support through purchases of EGP-dominated treasury bills (T-bills) and treasury bonds (T-bonds). The government is also studying the possibility of issuing international bonds backed by the GCC. The uninterrupted flow of fuel supports the prediction of continued GCC aid. Following the last Saudi fuel in-kind grant in August, the UAE announced it would provide $8.7bn in fuel products over a 12-month period starting in September. The report also states that the parliamentary elections likely to be called before year's-end are unlikely to change much. It is, however, likely to lead to limited party representation and a weakening of the formation of a coherent majority in parliament. The secular party landscape remains fragmented. The 2014-2015 fiscal year budget has implemented a number of fiscal reforms, including sales taxes increases on tobacco, income taxation increase on high-income entities, new property law, and energy subsidy reforms. Egypt will need implementation of other reforms to help meet its FY 2014-2015 budget targets, aiming to bring in EGP 25bn in net revenues (1% of GDP). Other reforms include the introduction of Value Added Tax (VAT) as general sales tax is phased out. This would bring in EGP 12.5bn in revenues. Another reform is the introduction of a new telecom 4G license that would bring in EGP8bn in revenues. A third reform is a new mining law.
