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IMF advises Zambia to delay re-financing $2.8 billion of Eurobonds

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LUSAKA (Reuters) – Zambia should delay its planned re-financing of $2.8 billion worth of Eurobonds until financing conditions ease, an International Monetary Fund representative said on Monday.

“We would caution the government not to tap into the international markets at this time,” the IMF’s resident representative, Alfredo Baldini, told reporters during the release of an IMF report on growth in sub-Saharan Africa.

The Eurobonds were issued from 2012 to 2015, and the Zambian government planned to re-finance them with longer-dated bonds at a lower cost, Finance Minister Felix Mutati said on Dec 7.

“The financing conditions are pretty tight right now, and it will be very expensive,” Baldini said on Monday.

In fact, the bonds would only fall due in 2022, 2024 and 2025, so the government didn’t need to rush into re-financing them, Baldini said.

The Zambian government has relied on external financing as its spending rose over the past few years while revenue remained almost the same, which has put pressure on its exchange rate, Baldini said.

Mutati said last week the equivalent of 19 percent of Zambia’s gross domestic product was being used to service debt and the government wanted to reduce that to about 15 percent.

Zambia issued a $750 million Eurobond in 2012, followed by a $1 billion issue in 2014 and another worth $1.25 billion last year, mainly for infrastructure projects.

 

(Reporting by Chris Mfula, editing by Larry King)

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Oil prices soar on global producer deal to cut crude output

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By Henning Gloystein

SINGAPORE (Reuters) – Oil prices shot to their highest levels since mid-2015 on Monday after OPEC and other producers reached their first deal since 2001 to jointly reduce output in order to rein in oversupply and prop up markets.

Brent crude, the international benchmark for oil prices, soared to $57.89 per barrel in overnight trading between Sunday and Monday, the highest level since July 2015.

U.S. West Texas Intermediate (WTI) crude also hit a July 2015 high of $54.51 a barrel.

Brent and WTI eased to $56.83 and $54.07 respectively by 0629 GMT, but were both still up over 4 percent from their last settlements.

With the deal signed after almost a year of arguing within the Organization of the Petroleum Exporting Countries and mistrust in the willingness of non-OPEC Russia to participate, focus is switching to compliance of the agreement.

“We believe that the obser vation of the OPEC-11 and non-OPEC 11 production cuts is required to sustainably support… oil prices to our 1H17 WTI price forecast of $55 a barrel,” Goldman Sachs said.

“This forecast reflects an effective 1.0 million barrels per day (bpd) cut vs. the 1.6 million bpd announced cut and greater compliance to the announced cuts is therefore an upside risk to our forecasts.”

AB Bernstein said the agreed deal “amounts to an aggregate supply cut of 1.76 million barrels per day (bpd) from 24 countries which currently produce 52.6 million bpd, or 54 percent of world oil supply.”

Bernstein said that “some of the non-OPEC supply cuts will come from natural decline, but most will come from self-imposed cuts.”

Saudi Aramco has told U.S. and European customers it will reduce oil deliveries from January.

“The kingdom is targeting excess inventories, the lion’s share of which sit in the United States,” said Virendra Chauhan, oil analyst at Energy Aspects in Singapore. “Lower Saudi exports to the U.S. could also make the export arbitrage uneconomic.”

OPEC plans to slash output by 1.2 million bpd from Jan. 1, with top exporter Saudi Arabia cutting around 486,000 bpd in a bid to end overproduction that has dogged markets for two years.

On Saturday, producers from outside OPEC agreed to reduce output by 558,000 bpd, short of the target of 600,000 bpd but still the largest contribution by non-OPEC ever.

“Non-OPEC participation should add to bullish sentiment,” Morgan Stanley said.

From outside OPEC, Russia said it would gradually cut 300,000 bpd.

“Once cuts are implemented at the start of 2017, oil markets will shift from surplus into deficit. Given the cuts in production announced by OPEC, we expect that markets will move into a 0.8 million bpd deficit in 1H17,” AB Bernstein said.

Still, some analysts expect producers, drawn by higher oil prices, to increase output again.

“While better compliance than we expect would initially lead to higher prices – with full compliance worth an additional $6 per barrel to our price forecast – we expect that a greater producer response, especially in the U.S., would eventually bring prices back to $55,” Goldman Sachs said.

 

(Additional reporting by Florence Tan and Keith Wallis; Editing by Richard Pullin)

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Tunisia’s UGTT union reaches wage deal with government, cancels strike

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TUNIS (Reuters) – Tunisia’s powerful UGTT union has cancelled a planned public sector general strike after reaching a deal with the government on salary increases covering the next two years, officials said on Wednesday.

The agreement reduces the prospect of widespread social unrest over austerity measures proposed in the 2017 draft budget, though the government still faces protests and industrial action from several sectors.

The UGTT had called a strike for Thursday over a proposed freeze on public sector wage increases. Under a compromise deal signed on Wednesday, the government will spread wage rises over the next two years, government and union officials told Reuters.

The UGTT also said it had also cancelled a private sector strike after entering salary negotiations with the UTICA industry and business employers’ association.

Tunisia has been praised as a rare Arab example of moderate politics and democratic transition since the overthrow of autocrat Zine El-Abidine Ben Ali in a 2011 uprising. But its economy has struggled and it faces pressure from international lenders to reduce public spending and cut the deficit.

The IMF says public sector pay in the North African state accounts for about 13.5 percent of gross domestic product, one of the highest rates in the world.

Many Tunisians are concerned about the rising cost of living, unemployment and the continued marginalisation of rural areas – factors that helped fuel the country’s uprising and, more recently, Islamist militancy among some disaffected young men.

 

(Reporting by Tarek Amara; Editing by Aidan Lewis and Mark Heinrich)

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Egyptian oil company takes $200 million loan for electricity generation

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CAIRO (Reuters) – Egypt’s state oil company signed a $200 million loan agreement on Tuesday with the African Export-Import Bank to help expand electricity generation and distribution, an Afreximbank statement said.

The government announced in August that it was raising household electricity prices by 40 percent as part of plans to eliminate power subsidies in the next few years. Consumption of cheaper electricity has exacerbated energy shortages and power cuts in summer months.

Afreximbank president Benedict Oramah said the facility agreed with the Egyptian General Petroleum Corporation would ensure uninterrupted energy supply for Egyptian industry by financing imports of oil and gas products.

Egypt floated its currency in November, enabling the government to clinch an IMF loan it hopes will help revive an economy hampered by political uncertainty since the 2011 uprising that toppled President Hosni Mubarak.

Oramah said Afreximbank had in recent years invested about $2 billion in energy generation and distribution in Egypt and in exporting energy products from Egypt to Africa.

Egyptian petroleum minister Tarek El Molla said the loan would “complement the efforts of the government in meeting the continuing needs for the development of the country”, the statement said.

 

(Reporting by Giles Elgood; Editing by Ruth Pitchford)

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Tanzania, Nigeria’s Dangote Cement haggle over price of natural gas

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DAR ES SALAAM (Reuters) – Tanzania is in talks with Nigeria’s Dangote Cement on the supply of natural gas to a manufacturing plant for the building material, but negotiations are currently held up over prices, said a government body in the East African country.

The $500 million cement factory in the southeastern Tanzanian town of Mtwara, set up last year with an annual capacity of 3 million tonnes, runs on expensive diesel generators and has sought government support to reduce costs.

The company, whose majority owner and chairman is Africa’s richest man, Aliko Dangote, halted production at the plant last week over technical issues.

State-run Tanzania Petroleum Development Corporation (TPDC) said talks were expected to conclude in January, with price disagreements yet to be resolved.

“Dangote has held protracted talks with TPDC on the pricing of natural gas. The Dangote Cement factory has asked for gas supply at below market prices, equivalent to the price of raw natural gas from producing wells,” TPDC said in a statement.

“TPDC cannot sell natural gas (to final consumers) on at-the-well price because there are additional costs incurred in processing and transporting the gas,” it said.

Tanzania announced in February it had discovered an additional 2.17 trillion cubic feet (tcf) of possible natural gas deposits in an onshore field, raising its total estimated recoverable natural gas reserves to more than 57 tcf.

Dangote, Africa’s biggest cement producer, has an annual production capacity of 43.6 million tonnes and targets output of between 74 million and 77 million tonnes by the end of 2019 and 100 million tonnes of capacity by 2020.

The company plans to roll out plants across Africa. In Tanzania, Dangote seeks to double the country’s annual output of cement to 6 million tonnes.

 

(Reporting by Fumbuka Ng’wanakilala; Writing by Aaron Maasho; Editing by George Obulutsa and Tom Hogue)

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Egypt’s non-oil business activity falls to 40-month low as costs rise: PMI

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CAIRO, Dec 5 (Reuters) – Business activity in Egypt shrank in November, with the deterioration picking up pace for the fourth consecutive month, as weakness in the pound currency raised costs and hit output, a survey showed on Monday.

The Emirates NBD Egypt Purchasing Managers’ Index (PMI) for Egypt’s non-oil private sector dropped to a 40-month low of 41.8 in November, edging down from 42 in October and far below the 50 mark that separates growth from contraction. Egypt’s central bank abandoned its peg of 8.8 pounds to the U.S. dollar on Nov. 3, in a move aimed at attracting capital inflows and ending a black market for dollars that had all but crippled the banking system.

The move was largely welcomed by businesses, which had struggled to obtain dollars amid strict capital controls, and helped Egypt clinch a $12 billion loan from the IMF. But the currency has since depreciated to 17.8 against the dollar.

“The ongoing downtrend evident in November’s survey highlights that there will be no quick fixes to Egypt’s economic difficulties, even following the EGP devaluation earlier in the month,” said Jean-Paul Pigat, senior economist at Emirates NBD.

“In this environment, it is crucial that authorities remain committed to their IMF-supported reform program in order to anchor investor confidence.”

Following the float, Egypt received the first $2.75 billion tranche of its three-year loan from the International Monetary Fund, to help plug its financing gap and stabilise the currency.

The PMI showed purchasing prices continued to rise in November to their highest levels since data collection started, as the currency depreciated against the dollar and the government raised fuel prices.

Output fell substantially in November to 36.8. The pace was marginally slower than October’s decline but remained one of the most marked since data collection began in April 2011, with companies citing poor economic conditions, high prices and shortages of some raw materials.

The index showed new orders dropping to 36.3 – the fastest fall in 39 months – largely due to soaring inflation linked to the weakness of the Egyptian pound against the dollar. As companies sought to curb rising costs, rate of employment fell for the 18th consecutive month in November to 45.1 compared with 46.2 in October, data from the survey showed.

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Oil hits 6-week high after OPEC deal, sterling jumps

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By Jamie McGeever

LONDON (Reuters) – Oil swept to a six-week high on Thursday after OPEC agreed to cut crude output to help clear a glut, while sterling hit a three-month peak after traders interpreted comments from a senior UK official as a crack in the government’s “hard Brexit” line.

Global bond yields rose on prospects that resulting inflationary pressures from oil’s surge will lead to higher interest rates, with the benchmark 10-year U.S. Treasury yield matching November’s 16-month high.

European stocks dived, shrugging off the bounce in Asian shares and following the S&P 500’s fall the previous day instead. U.S. futures pointed to another slight decline at the open on Wall Street.

The Organization of the Petroleum Exporting Countries on Wednesday agreed to its first output cut since 2008, finally taking action after global oil prices fell by more than half in the last two years.

Non-OPEC Russia will also join output reductions for the first time in 15 years. [nL8N1DV1UH]

U.S. crude oil added to overnight gains of 9 percent to reach $50.00 a barrel for the first time since October. Brent crude, which soared $4 overnight, touched a six-week peak of $52.73 a barrel.

The jump in oil prices added to inflation expectations in the United States, which were already rising on prospects that President-elect Donald Trump would adopt reflationary policies using a large fiscal stimulus.

“We’ve had a spike in oil prices plus better data, so we’re seeing the reflation trade come back,” said Martin van Vliet, senior rates strategist at ING.

As a result the rout in U.S. Treasuries resumed, with yields pushing higher, especially on longer-dated bonds. The yield on 10-year and 30-year bonds <US10YT=RR<, which are most sensitive to inflation eroding their value, rose 5 basis points to 2.417 percent and 3.077 percent, respectively.

 

STERLING EFFORT

The 30-year yield has climbed more than 40 basis points since the Nov. 8 presidential election, heading back towards a 14-month peak of 3.09 percent marked last week.

The 10-year yield had its biggest monthly rise in November since 2009. Bonds across the world have lost about $2 trillion in market value since the Nov. 8 U.S. election, according to Bank of America Merrill Lynch data.

Sterling grabbed the limelight in currencies, jumping to a three-month high against the euro and on a trade-weighted basis after Britain’s Brexit minister David Davis said London would consider paying into the EU budget for market access.

The pound had slumped to historic lows following June’s vote to leave the European Union on fears of a “hard Brexit”, which would see Britain give up full access to the single market and the EU customs union in favour of retaining full control over its borders.

“These headlines suggesting Britain may be able to access the single market are generating substantial sterling demand from traders and investors looking to reduce their short positions and unwind hedges,” said Neil Jones, head of FX hedge fund sales at Mizuho.

The Bank of England’s trade-weighted broader measure of sterling rose to 78.8 and the pound was at its strongest against the euro for three months at 83.96 pence per euro. It hit a three-week high of $1.2650 against the dollar after Davis’ comments.

The dollar advanced to a 9-1/2-month high of 114.83 yen before pulling back to 114.30 and the euro recovered from the previous day’s slide to trade back above $1.06 after shedding 0.6 percent the previous day.

Europe’s index of leading 300 shares was down 0.8 percent at 1,340 points, Germany’s DAX was down 1 percent and sterling’s strength drove Britain’s FTSE 100 down 1.3 percent.

Energy and resources stocks in Europe shares outperformed the broader indices, which snapped a two-day winning run. The STOXX Europe 600 Oil and Gas index was up 1.5 percent, while the basic resources index was up 2.1 percent.

MSCI’s index of Asian shares ex-Japan rose 0.4 percent, lifted by stronger-than-expected Chinese manufacturing data, and Japan’s Nikkei 225 rose 1.1 percent after the yen fell to its lowest since February close to 115 per dollar.

Spot gold touched a 10-month low of $1,163.45. Bullion fell 8 percent in November, its worst month in three years.

 

(Editing by Hugh Lawson)

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OPEC begins debate on oil cuts amid deep disagreement

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By Rania El Gamal and Alex Lawler

VIENNA (Reuters) – OPEC began on Wednesday debating a deal to curtail oil production and prop up the price of crude, with Iran and Iraq resisting pressure from Saudi Arabia to participate fully in any action.

Ministers from the Organization of the Petroleum Exporting Countries started an informal meeting at 0700 GMT at the Vienna Park Hyatt hotel and were due to begin a formal gathering at OPEC headquarters at 0900 GMT.

“There will be an agreement today,” an Iraqi delegate said as he entered the hotel.

“I’m optimistic,” said Iranian Oil Minister Bijan Zanganeh, adding there had been no request for Iran to cut output.

On Tuesday, Iran wrote to OPEC saying it wanted Saudi Arabia to cut production by as much as 1 million barrels per day (bpd), much more than Riyadh is willing to offer, OPEC sources who saw the letter told Reuters.

The 14-country group, which accounts for a third of global oil production, made a preliminary agreement in Algiers in September to cap output at around 32.5-33 million bpd versus the current 33.64 million bpd to prop up oil prices, which have halved since mid-2014.

OPEC said it would exempt Iran, Libya and Nigeria from cuts as their output has been crimped by unrest and sanctions.

The deal was seen as a victory for Iran. Tehran has long argued it wants to raise production to regain market share lost under Western sanctions, when its political arch-rival Saudi Arabia increased output.

In recent weeks, Riyadh changed its stance and offered to cut its output by 0.5 million bpd, according to OPEC sources, while suggesting Iran limit production at around 3.8 million bpd – in line with or slightly above the country’s current output.

Tehran has sent mixed signals, saying it wanted to produce as much as 4.2 million bpd. Iran’s letter to OPEC suggested Saudi Arabia should cut output to 9.5 million bpd.

Iraq has also been pressing for higher output limits, saying it needs more money to fight the militant group Islamic State. Iran and Iraq together produce over 8 million bpd, only slightly behind long-time leader Saudi with 10.5 million bpd.

The argument between Iraq and Saudi Arabia mainly focuses on whether Baghdad should use its own output estimates to limit production or rely on lower figures from OPEC’s experts.

Brent crude rose 1.5 percent on Wednesday to more than $47 a barrel after heavy losses a day earlier. [O/R]

Some analysts including Morgan Stanley and Macquarie have said oil prices will correct sharply if OPEC fails to reach a deal, potentially going as low as $35 per barrel.

 

(Additional reporting by Vladimir Soldatkin, Shadia Nasralla and Lisa Barrington; Writing by Dmitry Zhdannikov; Editing by Dale Hudson)

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Nigeria signs agreements to add more than 500 megawatts to national grid

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LAGOS (Reuters) – Nigeria has signed agreements to add more than 500 megawatts of capacity to its national grid, the office of the vice president said on Thursday.

Africa’s most populous nation produces less than 4,000 megawatts (MW) but requires around 10 times that amount to guarantee power for its 180 million inhabitants.

Chronic power shortages have hindered the country’s development for decades and are one of the biggest constraints on investment and growth in Africa’s largest economy, which is in recession for the first time in more than 20 years.

The vice president’s office said a number of agreements had been signed including ones with the World Bank and Niger Delta Power Holding Company (NDPHC).

“Vice President Yemi Osinbajo at the signing ceremony described the agreements as significant, enabling the consistent additional generation of more than 500 MW of electricity to the national grid,” said his spokesman Laolu Akande.

The vice president said the agreements would open up new opportunities for investments in Nigeria’s gas and power sectors.

He suggested that the West African country could potentially attract investment into the power sector.

Osinbajo’s office said Nigerian gas supplier Seven Energy was investing around $500 million in the construction of a gas processing facility at the Uquo Field in the southern state of Akwa Ibom.

And a Partial Risk Guarantee between the World Bank and NDPHC was signed to secure the supply of some 130 million cubic feet per day of gas to a power plant in the southern city of Calabar by Seven Energy.

The agreement covers private debt in the event of a government’s failure to meet specific obligations to a project.

 

(Reporting by Alexis Akwagyiram; Editing by James Dalgleish)

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Ethiopia looks to Islamic finance to tap domestic savings

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(Reuters) – Ethiopia’s central bank aims to develop Islamic finance to help expand financial access and inclusion, part of wider government efforts to mobilize domestic resources to diversify its economy, a central bank official said.

The landlocked country has one of the highest economic growth rates in Africa, but relies heavily on an agricultural sector that employs three-quarters of the workforce and contributes to around 80 percent of exports.

The government wants to industrialize its economy but this requires sustaining investment rates of almost 40 percent of GDP over the next five years, said Getahun Nana, Vice Governor of the National Bank of Ethiopia.

“This can only be achieved if the financial sector, particularly the banking industry, can play significant role in mobilizing desperately needed savings from domestic sources.”

Islamic finance could help in this endeavor, so the central bank is conducting a study to determine the demand for sharia compliant financial products in a country where around a third of the population of 100 million is Muslim.

The study would help determine what proportion of Muslims are excluded from the financial sector, Nana said in a speech during an Islamic finance conference held this week in neighboring Djibouti.

“If this is identified to be a barrier, a specific and enabling regulatory framework will be developed so as no one is excluded from obtaining financial services because of religious reasons.”

Islamic finance is still new in Ethiopia, despite the government allowing financial institutions to offer such products back in 2008.

Currently eight out of 18 financial institutions offer sharia compliant products via Islamic windows but they have so far mobilized less than 1 percent of total deposits, Nana said.

“Sharia compliant financing facilities that these banks provided to their customers are even very much insignificant.”

 

(Reporting by Bernardo Vizcaino; Editing by Simon Cameron-Moore; Editing by)

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