• Transit volume fell 46% y/y in 2024, Gaza cease fire agreement looks increasingly fragile
• We estimate Egypt lost USD 5.5bn Suez revenue to insecurity last year, government says loss closer to USD 8bn
• Egypt has expanded Canal's vessel capacity, but we don't expect notable improvement in traffic during H1 2025

The number of ships - consisting of tankers and cargo ships - passing through the Suez Canal fell by strong 18.2% m/m to 931 in February following a 3.5% m/m increase in January, according to revised data from IMF's PortWatch data platform. Adjusting for the fewer days of February, the decline was still substantial (-9.4% m/m), pointing towards the heightened regional and global uncertainty. In y/y terms (adjusting for the Leap year effect), the number of ships fell by 21% from an already low base, and the 7-day moving average fell to 33 ships on Feb 28, from 45 on the same day a year ago. Experts say that even if the Hamas-Israel ceasefire holds - which looks like an optimistic scenario at the moment - traffic through the canal is unlikely to pick-up substantially before June 2025.

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The number of ships fell by 46% y/y to 14.5k in 2024. According to our estimates, Egypt lost USD 5.5bn in Suez Canal revenues last year, but the government said the loss was closer to USD 8bn. The government's estimate is equal to about 2.0% of GDP and accounts for about 17% of CBE's foreign reserves. In related news, the government announced in early 2025 that the Canal was expanded, increasing the vessel capacity by 6 to 8 additional ships per day. However, taking into account the heightened insecurity in the Middle East, we don't expect Suez Canal revenues to recover during H1 2025.

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Egypt allocates EGP 1 bln to boost local automotive industry (Ahram)

PM: SCZone Factories Doubled to 130 (Sada Elbalad)

Egypt Announces Installation of Second Level of Dabaa Nuclear Power Plant Unit 2 (Sada Elbalad)

Chinese companies look to Egypt to support exports as US-China tariffs continue to rise (Egypt Today)

Madbouly reviews financial status of Egypt's New Urban Communities Authority (Daily News Egypt)

Huawei and Telecom Egypt partner for 5G rollout (Egypt Business)

How Licensing Fueled A USD 30mn Manufacturing Business In Egypt (Egypt Business)

Egypt strengthens commitment to private sector investment in waste-to-energy projects (Egypt Business)

• We think that Ramadan's impact on food prices and education cost adjustment will keep inflation above 15% y/y

CPI inflation is forecast to plunge to 14.5% y/y in February from 24.0% y/y in January, according to the media forecast of 15 analysts polled by Reuters between Feb 27 and March 5. The reason for the sharp slowdown is that the low base will fall out of calculations in February. We think that Ramadan's impact on food prices and the expected hike in education prices will keep inflation above 15% y/y. CAPMAS will release the February CPI print on Monday morning (March 10). There are actually two inflation prints before the MPC's next meeting on April 17, so analysts will be more interested in the inflation for March (due on April 10).

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• Contribution of non-oil activities to GDP reaches 75%

GDP expanded 3.8% y/y during the first nine months of 2024, according to the country's official news agency. This growth was driven by a strong expansion in non-oil sectors, which grew by 4.5% y/y. The contribution of non-oil activities to real GDP reached 75%, while oil-related activities contributed 25%.

It appears that economic growth has accelerated slightly, because GDP expanded by 3.6% y/y during the first half of 2024. The central bank expects GDP to grow 4.0% in 2024 and then 4.5% in 2025. The IMF is more modest and expects economic growth of about 4% in 2025.

Meanwhile, the World Bank expects growth of 3.3% in 2024 and then 4.0% in 2025.

We expect non-oil growth in the UAE to accelerate in 2025, supported by strong growth of the tourist sector, as well as strong growth of the real estate sector.

• Funding includes NGN 997mn for third-line antiretroviral drugs
• A further NGN 2bn is set aside for diabetes diagnostic kits
• FEC also approved NGN 679bn for 13 road contracts under the ministry of works

Following the suspension of medical aid from the United States Agency for International Development (USAID), the federal government has approved NGN 10.3bn to procure diabetes test kits, HIV drugs and hospital equipment to address urgent healthcare needs. This decision was announced after a federal executive council (FEC) meeting on Wednesday (Mar 5), where health minister Ali Pate confirmed that the allocation would help mitigate the impact of USAID's withdrawal and ensure continued access to essential medical supplies. The approved funds include NGN 997mn for third-line antiretroviral drugs for HIV/AIDS patients who have developed resistance to previous treatments, NGN 2bn for locally manufactured diabetes diagnostic kits and NGN 4.5bn for essential medications like antibiotics, antihypertensives and antidiabetic drugs.

Another NGN 2.1bn will be allocated for upgrading diagnostic facilities at the Abubakar Tafawa Balewa University Teaching Hospital in Bauchi, including the procurement of mobile X-ray machines and the installation of a 64-slice CT scanner. Minister Pate said these initiatives will support more affordable healthcare options for Nigerians. Along with healthcare funding, the FEC also approved NGN 679bn for 13 contracts under the ministry of works, including major road rehabilitation and construction works in several states.

• Nigeria submitted its application in April 2024
• EBRD's 2023 Annual Meeting decided on an expansion into sub-Saharan Africa
• Nigeria's membership could make it eligible for financial resources and policy support

Nigeria has officially joined the European Bank for Reconstruction and Development (EBRD) as its 77th shareholder, according to a statement released by the EBRD on Tuesday (Mar 4). Nigeria submitted its application in Apr 2024 and the EBRD's board of governors approved its membership in May of the same year. This follows the bank's decision at its 2023 annual meeting to expand its operations to sub-Saharan Africa and Iraq through a gradual and limited extension. Once the amendment is ratified by a majority of shareholders, Nigeria could transition to a recipient country. This would mean gaining access to the bank's financial resources and policy support for sustainable development.

EBRD president Odile Renaud-Basso welcomed Nigeria's membership, describing it as a landmark moment. Nigeria's finance minister Wale Edun said the EBRD membership will support sustainable infrastructure and a greener economy, aligning with Nigeria's economic reform agenda. While the bank is currently prioritizing support for Ukraine, the EBRD also focuses on economic transitions through investments, advisory initiatives and policy reforms in areas of private-sector growth, climate financing and digital integration.

• IMF said Nigeria's debt is not high risk, despite rising debt levels
• IMF's Gita Gopinath urged for sound policies towards debt sustainability
• Gopinath praised the CBN for stabilizing the naira and controlling inflation

The IMF has reassured Nigeria that its public debt is "moderate and not high risk," despite concerns about rising debt levels. During a visit to Nigeria, IMF first deputy managing director Gita Gopinath urged the country to maintain sound economic policies to ensure debt sustainability. However, she cautioned against excessive borrowing, stating that 75% of government revenue is already spent on interest payments, leaving little room for development spending. Nigeria's total public debt rose to NGN 142.3tn as of Sep 2024, from NGN 134.3tn in June, driven by exchange rate devaluation. Data from the Debt Management Office showed that while external debt in dollar terms increased slightly from USD 42.9bn to USD 43.03bn, its naira equivalent surged by 9.22% from NGN 63.1tn to NGN 68.9tn over the period.

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Gopinath also praised the CBN's tight monetary policy stance, which has helped stabilize the naira and control inflation. She highlighted the need for increased domestic revenue mobilization, targeted social interventions and continued efforts to reduce inflation. During her visit, Gopinath met with finance minister Wale Edun to discuss economic reforms and strategies to boost growth. Edun outlined efforts to increase social investment programs, improve tax collection and boost crude oil production, which has risen to 1.74mn bpd as of Jan (including condensates). On the global stage, he noted that Nigeria is advocating for fairer credit ratings for African economies and greater fiscal transparency to attract investors and reduce borrowing costs.

Tinubu lays foundation for FirstBank's new eco-friendly HQ (Punch)

PMS cost may drop further as crude prices fall (Punch)

Nigeria ranks sixth in global terrorism index, 565 killed in 2024 (Punch)

IMF Allays Fears, Says Nigeria's Public Debt Not High Risk (ThisDay)

Again, Nigeria's Oil Output Grows In February, OPEC Nation Pumps 70,000bpd Above Quota (ThisDay)

FEC Okays N10.3bn For Procurement Of Diabetes Diagnostic Kits, HIV/AIDs, Anti Hypertensive Drugs (ThisDay)

Naira recovery: BDC operators are facing constraints buying forex from banks - ABCON (Nairametrics)

AfDB plans $230 million trade finance package for Access Bank Nigeria (Nairametrics)

• Peak generation evacuation on Mar 4 stood at 5,801.84 MW
• Previous record of 5,713.60 MW and 125,542.06 MWh was set on March 2
• Power ministry said addressing tariff shortfalls and legacy debts is key for more progress

Nigeria's electricity grid has set a new record with a generation capacity of 6,003 megawatts (MW) on Tuesday (Mar 4), marking the highest in the nation's history. According to a statement on Mar 5 from the minister of power's special adviser on strategic communication, Bolaji Tunji, this milestone was accompanied by a peak generation evacuation of 5,801.84 MW and a daily maximum energy output of 128,370.75 megawatt-hours (MWh). The previous record was 5,713.60 MW and 125,542.06 MWh on Mar 2, indicating an upward trend in power availability. Tunji said this success stems from the federal ministry of power's collaboration with stakeholders to improve the power sector's efficiency and reliability. These have included the rehabilitation and upgrading of transmission and distribution networks, the introduction of new technologies, and policy reforms aimed at improving accountability.

Tunji called for continued support from state governments and private investors to build a reliable electricity network. Sustaining these gains will require addressing tariff shortfalls of NGN 1.94tn for 2024 and settling legacy debts of NGN 2tn owed to power generators. Tunji stated that full tariff regularization could push available generation capacity closer to 7,000 MW, further strengthening the sector. According to a report by the Nigerian Electricity Regulatory Commission in Jan, the federal government plans to allocate NGN 2.36tn in electricity subsidies for low-income consumers in 2025 as part of efforts to implement cost-reflective tariffs.

• Investment is part of Bahrain's plan towards clean energy transition

Bahrain's government is set to invest USD 500mn jointly with the UAE into the exploration and production of oil, natural gas, and mineral resources in Mongolia, according to media reports. The USD 500mn is the initial investment as the two countries also reportedly consider investing up to USD 10bn into a major renewable energy export project. Bahrain and its GCC partner states have shown interest into Mongolia's critical mineral exploration as the critical minerals will support the kingdom's clean energy transition and bolster the growth of clean energy technology.

Those developments come around two weeks after Bahrain's Deputy PM Shaikh Khalid bin Abdullah Al Khalifa met with his Mongolian counterpart Dorjkhand Togmid to discuss ways on bolstering the diplomatic, economic, and energy cooperation between the two countries. They stressed the importance of strengthening the investment cooperation to create new bilateral trade opportunities, but not further details were disclosed at that time.

• Eurobond placement, revaluation effects push reserves up
• Reserves are just below record-high reached at end-Sep 2024, account for 28.8 months of imports

The foreign exchange reserves of the Bank of Israel (BoI) rose by 1.9% m/m or USD 4.2bn to USD 220.3bn at the end of February, according to latest data. This was the second consecutive increase in the reserves and thus they were by USD 5.7bn higher than at the end of 2024. The reserves were just below the record high of USD 220.4bn reached at the end of September 2024. The BoI explained that the expansion in February was mainly on account of government receipts of USD 2.5bn in the month and we note that the treasury tapped the foreign market on Feb 11 raising USD 5bn in Eurobonds. The revaluation effects continued to be positive in February and their impact was estimated at USD 1.7bn. The BoI does not report any other significant flows in the period.

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Forex reserves accounted for 40.6% of GDP, the BoI said in the press release. This is lower than 41.1% at the end of 2024 but higher than 39.5% of GDP at the end of 2023. The reserves secured 28.8 months of imports at the end of February, slightly up from a month ago but still lower than at end-2024, according to our calculations.

• Pessimism in hotels declines sharply for foreign tourists, employment
• Past situation decreases implying deterioration of economic activity in January

The future expectations are positive for March for all economic branches but hotels, according to the latest business sentiment survey of the stat office (CBS). We note though that the figures indicate less optimistic sentiments regarding local and export orders and employees' number in industry compared to the previous month as well as regarding ongoing activity in construction. On the other hand, all future expectations in retail (sales, employment and orders from suppliers) and services (employment and sales) increased and also those regarding the scope of production in industry and employment in construction. We note also that even if still negative, the future expectations in the hotel industry improved sharply compared to the previous months, especially regarding foreign tourist arrivals and employments while the expectations for stays of locals remain rather subdued. This should be due to the lasting for now calm in the region but we note that there has been no progress in talks for the continuation of the ceasefire with Hamas so the relative stability is rather fragile.

The CBS also said that the current situation indicator was positive in all industries but hotels. However, the assessment of the past situation, which the CBS finds to be correlated with the revenues of the industries, deteriorated to post a small negative value suggesting deterioration in economic activity at the start of 2025. The stat office explained that the situation deteriorated in industry (sales and production) and domestic sales of the retail branch explaining that the latter might be related to the increase in the VAT rate in January. In contrast, there was a sharp improvement in stays of tourists but the value was still negative.

Not Enough Spies or Human Intelligence: The Israeli Security Failures That Led to Oct. 7 (Haaretz)

Netanyahu's Dirty War Against the IDF and Shin Bet Would Shock Even Orwell (Haaretz)

Live Updates | Trump Tells Hamas to 'Release Them Now or It's OVER' After Meeting Freed Israeli Hostages (Haaretz)

REPORT Netanyahu considering firing Shin Bet chief Ronen Bar in coming weeks (Jerusalem Post)

'This is your last warning!': Trump gives ultimatum to Hamas (Jerusalem Post)

'Victory and defeat of the enemy': New IDF chief Zamir's first official order (Jerusalem Post)

[Finance minister] Smotrich proves again and again: His deficit targets are empty promises (Calcalist)

The removal of the Ombudsman: The government enters the final battle to decide democracy (Calcalist)

Teva is about to fall into the hole again in 2026. How does it intend to get out of it? (TheMarker)

Will the program that provides a discount of more than 600,000 shekels per apartment be sharply cut? (TheMarker)

Delegation of captive survivors met with Trump: "You are the hope" (Globes)

Justice Minister Yariv Levin has begun proceedings to dismiss the legal advisor to the government. (Globes)

• Outgoing chief Halevi calls for state commission of inquiry
• Zamir likely to have more aggressive approach towards Hamas

The new Israel Defence Forces (IDF) chief of staff Eyal Zamir took office on Wednesday. Zamir said during the ceremony that Hamas suffered a significant setback but was not destroyed and therefore, the IDF mission was not complete. He also committed to bring back the remaining hostages by any means possible. Outgoing chief of staff Herzi Halevi, who resigned to take responsibility for the Oct 7 massacre, urged the establishing of state commission of inquiry to get to the root of the problems that led to the events on Oct 7 and the war that followed.

Local media reported recently that Zamir was preparing a plan for conquering Gaza at the orders of PM Netanyahu and defence minister Yisrael Katz. Media said that the war will likely resume in 6-8 weeks and the IDF will deploy more forces in Gaza than ever before amid its target to destroy Hamas. According to Zamir, the plan might be completed in 6 months or even less, the report said. At the same time, Halevi's approach to Gaza has been rejected by ministers who accused Halevi of doing all in his power to prevent victory in the war, the media report said quoting unnamed Israeli government source. The source said that Zamir was much more constructive. Media report also that Zamir has said that Halevi's latest proposal for the war in Gaza was too moderate and promised much more aggressive and decisive approach with more IDF forces involved.

• Minister accuses attorney general of preventing effective cooperation with government
• Impeachment might end up at Supreme Court and likely not be successful
• Opposition fiercely slammed the move, promises to fight it with all legal means, urges protests

Justice minister Yariv Levin launched officially on Wednesday evening an initiative to sack Attorney General Gali Baharav-Miara, local media reported. The justice minister sent a specially-prepared multiple-page document to all ministers accusing Baharav-Miara of siding with the opposition and blocking government policies, which prevented effective cooperation. Levin also claimed that she did not meet her statutory requirement to provide the government effective legal representation in Supreme Court proceedings. Levin did not address the reasoning behind many of the attorney-general's decisions but claimed that her motivation was to trip up the government as much as possible. The minister also criticised the current role of the attorney general in the country saying that when a new government is established it does not choose a new attorney general even if the powers of the latter extend far beyond legal counsel.

The minister formally requested that Cabinet Secretary Yossi Fuchs convene a government meeting to discuss the dismissal as soon as possible. If the government adopts decision to express no confidence in the attorney general, a public committee, headed by a retired Supreme Court justice, will review the issue and will also vote it. Local media write that the initiative will most likely end up at the Supreme Court as many petitions against such government decision are likely to be submitted. It is expected that all Supreme Court justice will oppose the attorney general dismissal, even the more conservative justices. An attorney general might be dismissed on grounds of lack of competence, criminal investigation, inappropriate conduct, or prolonged and fundamental disagreements that prevent effective cooperation.

The move does not come as a surprise because Levin as well as other ministers, including PM Netanyahu have also made similar claims in the past. A number of ministers supported the initiative while the opposition fiercely slammed the move, condemned it as an attack on the rule of law, and committed to do what it takes and to use all legal means to thwart it. Yair Golan, the leader of The Democrats, called on the public to take to the streets. The Movement for Quality Government in Israel, which was one of the major driving forces behind the protests against the judicial reform, also threatened protests. A MK from the opposition claimed that if the government proceeds with the attorney general dismissal, this would be a direct violation of Netanyahu's conflict-of-interest agreement, potentially triggering legal action to declare him unfit for office. Gali Baharav-Miara was appointed by the previous government and has been many time criticising the incumbent government for taking decision that are not in line with country's legislation. Some of the major issues refer to the judicial reform the government is still trying to promote and legislation for exempting Haredi students from military service.

• When offsetting for leap year effect, growth is stronger at 10.1% y/y
• Increase partly reflects price hikes but also confirms resilient private consumption

Credit card purchases rose by 6.3% y/y in February and when offsetting the leap year effect, growth is higher at 10.1%, according to data by the bank services company SHVA (Automated Banking Services) quoted by local business daily Calcalist. Thus, the moderation was only marginal from 11% y/y in January. In monthly terms, the average daily credit card spending decreased by some 2% though. We note that the still strong private consumption comes at the backdrop of the austerity measures of the government that came into effect as of the start of 2025 and were supposed to press down households' spending. Yet, one of the measures was a 1pp VAT rate hike that should have pushed up inflation as well as price increases for some food items but these are not expected to explain entirely the surge in consumption.

Components breakdown reveals that the largest growths were in the sectors that were specifically affected during the war. Thus, the credit card spending jumped by 51% y/y in the hotels business, by 49% y/y in travel agencies, by 11% in the aviation industry and by 22% in the leisure and entertainment industry. SHVA CEO Eitan Lev-Tov commented that the spending on tourism and cultural activities was now even higher than before the war. Credit card spending on food also grew relatively strong, by 8% y/y. On the other hand, some weakening was reported in credit card spending on electricity and electronics where growth was only 1.5% y/y, and in clothing and footwear, which marked increase in spending of 3.2% and this might be reflecting only price increases while private consumption of those items might have fallen in real terms. Credit card spending on fuels was the only component to decline (down by 3%) and this was likely due to a decrease in prices y/y.

• Terminal 1 to account for 25% of all flights departing from Ben Gurion in April
• Return of foreign air carriers to increase departures of Israelis abroad and thus press down private consumption

Israel Airport Authority (IAA) will open Terminal 1 at the Ben Gurion international airport at the end of March. The facility was closed from November while earlier it faced a significant drop in traffic by more than 70% in terms of passengers and flights in Jan-Sep 2024 as almost all foreign air carriers cancelled flights to the country because of the war. Terminal 1 charges lower fares than the main Terminal 3 and it will host flights of the three Israeli air carriers El Al, Arkia and Israir as well as flights of the low-cost Wizz, Ryanair and EasyJet. According to IAA data, more than 1,377 flights are expected to take off from Terminal 1 (about 25% of all flights departing from Ben Gurion Airport) during April (the month of Passover vacation). We note that the war had a significant negative impact on both incoming and outbound tourism, also because of the cancelling of many foreign air companies' flights and the significant increase in prices of local carriers. That had a positive impact on private consumption in the country. with the return of more air companies to the country, we expect the departures of local tourists to increase and have a moderating effects on private spending in the country, in addition to the effects from the initiated by the government fiscal consolidation measures aiming to reduce the fiscal deficit.

• Natural gas production rises by 8.3% in 2024
• Energy minister expects state's total income from natural gas to reach NIS 5bn this year, NIS 10bn per year in near future

The royalties from natural gas and minerals increased by 8.2% to NIS 2.37bn in 2024 compared to NIS 2.19bn in 2023, according to the annual report of the specialised administration within the energy ministry. There was an increase in royalties from natural gas and oil of 10.88% to NIS 2.31bn in 2024 at the backdrop of 8.3% increase in natural gas production in the period. The report also showed that gas exports to Egypt and Jordan rose by 13.4% last year. Total of 59.2% of the natural gas royalties came from gas exports from Leviathan and Tamar and oil exports from Karish. Revenues from minerals royalties were down to NIS 41.2mn in 2024 from NIS 44.2mn the previous year as prices of phosphates fell. Energy minister Eli Cohen said when commenting on the report that the state's total income from natural gas (royalties, companies tax and the extra levy on super profits) will amount to some NIS 5bn this year and expectations are that in a few years the state's total income from natural gas will reach about NIS 10bn annually.

• Jordanian armed forces killed 4 drug smugglers

Soldiers of the Jordanian army clashed with armed drug smuggling group near the border with Syria, according to a statement by the military. During the clashes, Jordanian forces killed four smugglers and prevented the other group members' attempt to cross the border as they retreated back to Syria. Jordanian authorities did not disclose the amount of the seized drugs and weapons.

Jordan has faced many attempts of drug smuggling from Syria under former President Assad's regime, while Jordanian government officials had accused pro-Iranian militias of conducting the operations via the border with the protection of units of the Syrian army loyal to Assad. But King Abdullah and Syria's de-facto new leader Ahmed al-Sharaa have recently agreed to establish a cooperation towards boosting the border security and curbing drug smuggling. However, Syria's new leadership has so far not commented on the latest drug smuggling attempt from its territory.

• Both output and new orders increased, albeit at slower pace
• Employment increased for first time since November, 2023

Lebanon's Purchasing Managers' Index (PMI) decreased slightly to 50.5 points in February from 50.6 points in the preceding month, according to the S&P Global PMI report published on Mar 5. The development indicates that Lebanon's private business activity continues improving, albeit at a softer pace. Overall, the increased optimism among private sector firms comes following the US and France-brokered Israel-Hezbollah ceasefire agreement, the election of a new president, and the formation of a fully-functional government, ending a prolonged political deadlock.

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Both output and new orders increased in February, albeit at a slightly slower pace compared to January, when record levels were registered. The stronger demand and the greater new business volumes from international customers contributed to the improvement over the period. Meanwhile, the level of employment also increased for the first time since November, 2023.

Looking forward, most private sector firms remain optimistic regarding the business environment over the next 12 months. The boosted business confidence comes amid expectations that the new government is committed on reaching a deal with the IMF on a bailout programme and enacting key economic reforms.

• Expectations across all sectors were largely positive for employment
• Most sectors report increase in production in Q4, raw materials supply difficulties remain

The manufacturing industry is expected to see a slight production increase in Q1 2025, according to the quarterly business confidence surveys by the statistical office HCP. This increase will be driven by growth in the food, metallurgy, apparel, and non-metallic mineral sectors, while the automotive and leather industries anticipate a decline. Employment in manufacturing is expected to remain stable. The extractive industry forecasts a rise in production, mainly due to higher phosphate output, with no significant changes in employment. In the construction sector, overall growth is anticipated, supported by building construction and specialized construction work, though civil engineering is expected to decline. Employment in construction is projected to increase.

In contrast, the energy sector is set to decline, primarily due to reduced electricity and gas production, leading to job losses. The environmental industry is expected to remain stable in both production and employment, particularly in water treatment and distribution.

Looking back at Q4 2024, the manufacturing sector grew, driven by automotive, metallurgy, food, and non-metallic minerals, while electrical equipment and textiles declined, with stable employment and 39% of firms facing raw material shortages. The extractive industry contracted due to lower phosphate production, despite rising employment. The energy sector expanded with higher electricity and gas distribution, though employment fell, while the environmental sector remained stable. Construction saw growth in building and specialized works, a decline in civil engineering, stagnant employment, and 13% of firms struggled with raw material supply, with 48% investing in equipment upgrades.

The latest data suggest that the manufacturing sector is expected to maintain steady growth in 2025, supporting the overall economic expansion. Nonetheless, ongoing raw material supply chain disruptions could pose risks. The automotive sector's slowdown could signal some downside, probably on the back of lower global demand. The expected rebound in key phosphate production is a positive sign for the extractive industry, but its sustainability will depend on global demand and pricing trends. The construction sector remains a key driver, benefiting from government-backed infrastructure projects. However, the civil engineering slowdown could indicate delays in major public works. Expectations across all sectors were largely positive for employment, indicating that the labor market may have moved past its peak in unemployment seen in 2024.

• Study is expected to take 40 weeks.

Morocco is seeking advisers to develop a strategic plan to reform state-owned financial firms, aiming to enhance their role in financing the economy. The reform, led by ANGSPE (the agency overseeing state-owned enterprises), focuses on improving coordination, synergies, and ensuring "competitive neutrality" among public financial institutions. The initiative may involve merging key state-owned financial entities, including Caisse de Dépôt et de Gestion, Crédit Agricole du Maroc, Al Barid Bank, and the King Mohammed VI Investment Fund. The study is expected to take 40 weeks.

This move aligns with broader government efforts to restructure state-controlled institutions for improved efficiency and economic impact. The WB approved a USD 350mn loan to support this effort in July 2024. The public companies' portfolio includes 272 public enterprises and establishments (EEP), broken down as follows: 227 public establishments and 45 public limited companies with direct Treasury participation. In addition, some EEPs own subsidiaries and/or holdings totaling 517 entities, 53% of which are majority owned.

• However, economic and fiscal reliance on oil and natural gas sector is key weakness
• Hydrocarbon revenue accounts for more than 70% of total government revenue

The outlook for Oman's economy is positive thanks to ongoing improvements in the government's debt metrics, underpinned by supportive oil prices and prudent fiscal management, which increase the likelihood that Oman's fiscal strength could be sustained at a level that supports a higher rating, Moody's said upon competing a periodic review of the country's ratings.

A declining debt burden, and in particular its foreign-currency portion, expands Oman's capacity to absorb shocks such as cyclical declines in global energy prices. Stronger debt metrics also afford the government more time and fiscal space to implement structural reforms and accelerate economic and fiscal diversification.

Oman's credit ratings, including its Ba1 issuer ratings, are supported by its high per capita income, a moderate and declining government debt burden, and robust government financial assets and central bank foreign-currency reserves.

However, Oman's weaknesses are its heavy economic and fiscal reliance on the oil and natural gas sector, which exposes the country to the risk of a large fiscal and current account deterioration and sudden increases in government liquidity pressures whenever oil prices drop significantly, according to the agency.

The government's fiscal position remained robust during 2024, with the debt burden declining to 35% of GDP (OMR 14.4bn or USD 37.4bn) at end of 2024 from 37.5% of GDP (OMR 15.3bn or USD 39.7bn) at the end of 2023. The overall fiscal surplus narrowed to 2.9% of GDP (OMR 1.2bn or USD 3.1bn) in 2024 from 6.9% of GDP (OMR 2.8bn or USD 7.3bn) in 2023, even after including extrabudgetary oil revenue that was channelled directly toward debt repayments.

The approved 2025 budget maintains spending restraint and points to another, albeit increasingly smaller, fiscal surplus in 2025, based on Moody's assumption that oil prices will trend below the 2024 average.

However, the budget does not introduce any new non-oil revenue measures, such as the proposed personal income tax on high income earners, nor does it outline an updated medium-term fiscal framework.

Oman's public finances and debt metrics remain highly vulnerable to declines in global oil demand and prices, with hydrocarbon revenue accounting for more than 70% of total government revenue and non-hydrocarbon revenue covering only 30% of government spending in 2024, according to Moody's.

• Analysts estimate potential deal at around USD 6-8bn

Saudi Aramco is in the early stages of considering a potential bid for BP's lubricant business Castrol, according to news reports. BP and Aramco have not commented yet, but analysts estimate the potential deal will be around USD 6bn to USD 8bn. BP said last week it was reviewing its lubricants business, Castrol, and targeting USD 20bn in divestments by 2027.

• In January, Italy signed agreements worth USD 10bn with kingdom as part of strengthened strategic partnership

Saudi Arabia's sovereign wealth fund PIF announced on Wednesday it had signed a new MoU with Italy's state export credit agency (SACE). Under the MoU, the parties will cooperate on sharing information and business expertise, with a focus on strategic sectors, as well as considering a provision of SACE support for up to an additional USD 3bn for the financing of projects led by PIF and PIF portfolio companies. In January, Italy signed agreements worth USD 10bn with Saudi Arabia as part of a strengthened strategic partnership, including SACE loan guarantees worth USD 3bn for Neom, the giga-project that is currently being built by the kingdom. The sovereign wealth fund, which is shouldering the massive investment program Vision 2030, has been trying to boost its finances to fund the kingdom's ambitious spending plans.

• Guarantee will cover 75% of the credit risk for a loan from Banco de Fomento Angola

The finance ministry has approved a sovereign guarantee of up to AOA 7.5 (USD 8.2mn) to support financing for the 2024-2025 coffee campaign. This guarantee will cover 75% of the credit risk for a loan from Banco de Fomento Angola (BFA), backed by 10-year Non-Adjustable Treasury Bonds. The funding is aimed at medium and small-scale commercial coffee producers, supporting government push for large-scale agricultural development, import substitution, and food security.

• Recent NBE's FX auction saw 27 banks participate, with USD 59.2mn sold at ETB 135 per USD
• Birr shows continued weakness post-auction, as buying rates climb to ETB 128.1 per USD
• Central Bank's intervention aimed to manage liquidity and stabilize inflation amid growing forex demand

The National Bank of Ethiopia (NBE) recently conducted a special foreign exchange auction on Feb 25, offering USD 60mn to commercial banks. The auction followed a comprehensive macroeconomic reform program launched in Jul 2024, which improved the balance of payments through rising exports, remittances, and capital inflows. Twenty-seven banks participated, and seven banks acquired a total of USD 59.2mn at a weighted average rate of ETB 135 per USD. The auction occurred amid a broader effort to stabilize the Birr, which depreciated by about 2.1% over the week.

Monetary officials sought to fine-tune liquidity by channeling part of the forex reserves to the private sector through the auction. The Commercial Bank of Ethiopia (CBE) secured 40% of the auctioned dollars at ETB 135 per USD while maintaining the lowest retail buying rate at ETB 124 per USD. Other banks, including Hijira Bank, Global Bank, Oromia International Bank, Dashen, and Ahadu, offered rates ranging from ETB 135 to ETB 140, with Hijira Bank bidding as high as ETB 140 for USD 2mn. The discrepancy between auction prices and publicly posted rates highlighted the challenge of reconciling official valuations with market realities.

We note that in the days following the auction, commercial banks adjusted their forex rates, with average buying rates rising from ETB 125.4 to ETB 128.1 and selling rates climbing from ETB 127.8 to ETB 130.6 between Feb24 and Mar 1. However, today Mar 6, the Ethiopian Birr stabilized at ETB 127 per USD, indicating a reversal of the earlier depreciation. Analysts interpreted the stabilization as a sign that targeted auctions and policy measures had begun to temper market pressures, although significant gaps persisted between auction rates and those posted by banks. Despite enhanced forex reserves, the Birr faced ongoing headwinds, and policymakers appeared determined to refine their strategies further to ensure sustained price stability.

EmergingMarketWatch coverage of Ghana will be limited on 06 Mar 2025 due to a public holiday.

One dead, scores injured as deadly explosions rock mining shops in Odumasi (Joy FM)

There are less than 60 political appointees at Presidency - Kwakye Ofosu (Joy FM)

Minority's motion to probe post-Dec. 7 dismissals blocked (Joy FM)

'Government size shrinks on paper, but grows in reality,' says Samuel Jinapor (Joy FM)

BoG Governor's HQ cost presentation clears misconduct suspicions - Habib Iddrisu (Citi Newsroom)

GCB Bank posts record GHS 1.91bn profit in 2024 (Citi Newsroom)

BoG HQ: $230m paid to contractor, $31.8m outstanding - Asiama (Citi Newsroom)

• Project cost was initially put at USD 88mn but was later inflated
• Project was one of questionable deals that increased criticism of previous administration

The newly appointed Governor of the Bank of Ghana (BoG), Johnson Asiama, revealed details about the new headquarters project for the bank which was first discussed back in 2011. The initial cost estimate was USD 88mn, but it increased to USD 261.8mn after construction works were launched in 2019. Asiama said that the building is 98% complete and USD 31.8mn are yet to be paid to the contractors to finish works. He added that the BoG Board will order an audit of the project cost.

The project was one of the deals that were deemed questionable because of the high costs assigned to them, and attracted criticism of the previous administration, ultimately leading to their election loss in December 2024.

• Ghanaian president Mahama offers to mediate, says to visit the three countries soon
• Mali, Burkina Faso and Niger left ECOWAS last year, sparking concerns about regional security and integration

President Alassane Ouattara and his Ghanaian counterpart John Mahama urged Mali, Burkina Faso and Niger to rejoin the Economic Community of West African States (ECOWAS). The three countries, which are all ruled by military regimes after coups carried out between 2020 and 2023, left ECOWAS last year and formed the Alliance of Sahel States (AES). Mahama offered to mediate between the Sahel countries and ECOWAS and said he planned to visit all three soon. Ouattara voiced hope that Mahama would be successful in his mission to bring the three countries back to ECOWAS. We note that there were previous diplomatic efforts led by Togo and Senegal to convince the AES countries to rejoin the West African bloc, but they failed. Their withdrawal has sparked concerns about the security situation in the region, economic ties and integration efforts. It should also be noted that the three countries are still members of the West African Economic and Monetary Union (UEMOA or WAEMU).

• UEMOA growth expected to pick up to 6.3% this year from 6.2% in 2024
• Growth is supported by extractive, manufacturing and agriculture sectors
• Inflation is forecast to slow to 2.7% this year, within the BCEAO target

The monetary policy committee (MPC) of the West African central bank (BCEAO) left its benchmark interest rates unchanged at a meeting held on Wednesday, Mar 5. The minimum bid rate for liquidity auctions was left at 3.50%, the marginal lending rate at 5.50%, and the reserve requirement ratio at 3.0%.

The MPC said that the economic activity in the West African Economic and Monetary Union (UEMOA or WAEMU) picked up to 7.0% y/y in Q4 from 5.8% y/y in Q3, and full-year growth accelerated to 6.2% y/y from 5.3% y/y in 2023. It is expected to inch up to 6.3% in 2025 supported by the extractive, manufacturing and agriculture sectors, as well as stronger credit activity. The private sector credit increased by 6.3% y/y at end-2024, picking up from 5.8% y/y at end-September 2024, and is seen to further rise to 8.6% this year.

UEMOA inflation slowed to 2.9% y/y in Q4 2024 from 4.1% y/y in Q3 thanks to a decline in prices of imported food and energy products, as well as locally produced food as the 2024/25 food crop has been better. Inflation averaged 3.5% y/y in 2024 and is seen to ease further to 2.7% this year, meeting the 3% target. The outlook for 2025 is subject to upside risks including regional security problems, climate change that could reduce food production as well as the impact of geopolitical and trade tensions on global energy and food prices. The external position has also improved thanks to higher commodities, such as oil and gold, higher oil and gas production and exports, and mobilisation of external funds by member countries.

The next MPC meeting should be held in June, probably in the first week of the month.

Banks force Treasury to pay KQ's Sh19bn defaulted loan (Business Daily)

CBK in talks with banks to overhaul loan pricing models (Business Daily)

56pc of NHIF members defaulted on contributions (Business Daily)

Treasury finally admits questionable Sh73 billion in the budget (Nation)

Ruto-Raila pact: Why another Cabinet shake-up looms (Nation)

Private firms in longest growth streak in 3 years (Nation)

Wahome, Hinga taken to task over affordable housing (The Standard)

Court rules SRC has say on parastatals pay (The Standard)

• Endorses govt's deficit targets, proposed borrowing mix
• Recommends measures to improve debt management

The National Assembly Liaison Committee has presented its report on Kenya's 2025 Medium-Term Debt Management Strategy. The Committee endorses govt's fiscal targets, in which the deficit should be set at 4.3% of GDP in the next FY 2025/26 (starting 1 July), reducing to 3.5% in 2026/27 and 3.2% in 2027/28. The Committee further endorses the proposed borrowing strategy of 35.0% net external borrowing and 65.0% net domestic borrowing over the 3-year period, but highlighted consistent deviations between the mix recommended in the debt strategy and the actual borrowing, including in govt's projections for the next FY.

To improve debt management, the report recommends the full automation of debt service fund withdrawals and the integration of the Public Debt Management System with IFMIS by 31 May. The Treasury must also implement the Treasury Single Account across all government entities, including parastatals, by 1 July. Additionally, an inter-agency committee involving the Central Bank and the Controller of Budget's Office will review public debt procurement and utilisation, with findings to be submitted to the Parliament by 31 May. The govt is also expected to continue reporting on progress towards the achievement of the 55.0% of GDP PV debt anchor by 2028.

• Sizably above pre-announced target of KES 25bn
• Govt has upped its net domestic financing target in second supplementary budget

The Central Bank sold KES 35.2bn worth of T-bonds, maturing in 2036 (13.94% coupon), according to the auction outcome published on its website. Demand at the auction remained strong, at KES 47.0bn, sizably above the pre-announced auction target of KES 25bn. The weighted average yield on accepted bids printed at 13.80%.

This brings the total amount of T-bonds issued so far this FY to KES 562bn in our calculations, against an indicative issuance plan of KES 600bn - KES 880bn, according to govt's published borrowing plan. Govt's domestic financing projections have however since been revised upwards, with net domestic financing seen at close to KES 600bn in the second supplementary budget, vs. KES 400bn in the initial budget.

• Output and new orders increase, but only in some sectors
• Sentiments on 12-month outlook remain at historic lows

The CfC Stanbic Bank PMI showed that the private sector activity improved for a fifth consecutive month in February, though the improvement was again marginal. The index remained above the 50-points threshold signaling stabilization, edging up to 50.6 in the review month from 50.5 in the preceding one. This reflected continued expansion in output and new orders, particularly in some sectors, including agriculture, manufacturing and construction while demand remained weak in the services sector. As result, employment also posted an increase, though growth remained weaker than the series average.

Data Download

Input costs inflation softened in the review month as growth of input prices slowed further, reaching a four-month low. Consequently, growth of selling charges decelerated as well. On the downside, expectations remained at historic lows, with just 5% of firms seeing activity expanding over the next 12 months, marginally down from 6% in January.

We note GDP growth is estimated to have slowed to 4.6% in 2024 from 5.6% in 2023, as lower govt spending and youth protests weighed down. It is now seen picking up to about 5.0% this year, and remaining at that level in the medium term.

• UEMOA growth projected at 6.3% in 2025, up from 6.2% in 2024
• Inflation expected to decline to 2.7% in 2025, within BCEAO's target

The West African central bank (BCEAO) maintained its key interest rates in a MPC meeting on 5 March. The minimum bid rate for liquidity auctions remained at 3.50%, the marginal lending rate at 5.50%, and the reserve requirement ratio at 3.0%.

Inflation eased to 2.9% y/y in Q4 2024 from 4.1% y/y in Q3, aided by lower food and energy prices, BCEAO said. The annual inflation rate averaged 3.5% y/y in 2024 and is forecast to decline to 2.7% in 2025, staying within BCEAO's 3% target.

The external balance has improved, bolstered by stronger commodity exports, increased oil and gas production, and external funding secured by member states. Private sector lending grew by 6.3% y/y at end-2024, up from 5.8% y/y in Q3, and is expected to rise further to 8.6% in 2025. Economic activity in UEMOA accelerated to 7.0% y/y in Q4 2024 from 5.8% y/y in Q3, bringing full-year growth to 6.2% y/y, up from 5.3% y/y in 2023, BCEAO estimated.

Going forward, growth is seen picking marginally up to 6.3% in 2025, supported by higher output in extractive industries, manufacturing, and agriculture, and by faster credit growth. However, risks remain, BCEAO noted, citing security concerns, climate-related disruptions to food supply, and global trade uncertainties affecting energy and commodity prices.

• Formal labour negotiations scheduled to start on 2 April with social pact to be concluded by 1 May
• Govt committed to addressing some concerns raised during a tripartite meeting with unions and employers

In the weekly cabinet meeting, held on 5 March, president Faye emphasized the importance of social dialogue and economic stability, according to the published communique. He praised PM Ousmane Sonko and the government for their transparent engagement with trade unions and employers during the tripartite meeting on 27 February, where economic, financial, and social challenges were discussed. Acknowledging the unions' and employers' understanding of the country's fiscal realities, he urged the government to continue constructive negotiations leading to the signing of a Social Stability Pact by 1 May, 2025.

The president directed cabinet members to prioritize addressing union and employer demands, while also examining ways to accelerate the settlement of audited domestic debt. He called for a structured salary evaluation in the public sector to ensure fairness. Additionally, the government was tasked with enhancing economic opportunities for women, promoting entrepreneurship, and finalizing a new law on women's economic empowerment.

PM Sonko reaffirmed the government's commitment to an inclusive and balanced approach in labor negotiations. He set 2 April as the deadline to begin formal talks. In the meantime, he urged cabinet members to accelerate and finalize measures, addressing some of the concerns, raised during the meeting: measures that can be implemented immediately, the wage equity project, the second set of measures to reduce cost of living with minimal or no budgetary impact, the renovated social housing construction program, the revival of economic activities, particularly in the building and public works sector, the completion of old school, university and hospital construction projects, and the start of new ones.

• Current account beats market expectations for a deficit of 0.9% of GDP in Q4
• Reduction of CA deficit to 0.6% of GDP in 2024 strengthens the resilience to shocks
• Trade surplus gets a strong boost from net gold exports, while merchandise exports still contract

The current account deficit was reported at ZAR 31.6bn in Q4/2024, halving to 0.4% of GDP from 0.8% in the preceding quarter, according to a release by the central bank on Thursday (Mar 6). The outcome significantly outperformed consensus market forecasts for a deficit of 0.9% of GDP. The major driver for the narrowing was the expansion of the goods trade surplus and the decline in the primary income deficit. In the full year, South Africa's external position strengthened with a deficit of only 0.6% of GDP, narrowing from 1.6% in the year prior. The current account gap was only half of what the central bank projected in January. The improvement is firming the country's external buffers and fortifying resilience against potential fallout from global trade wars. Unsurprisingly, the market cheered the improvement on the current account and USD/ZAR is aiming for a break below 18.20 while the dollar is undermined by US tariff concerns.

Data Download

The goods trade surpluses expanded to ZAR 233bn in Q4 driven by a surge in net gold exports. Total goods exports including gold increased by 2.6% q/q as net gold exports exploded by 41.2% q/q thanks to higher prices and volumes underpinned by the surge in global uncertainty. Meanwhile, the merchandise exports contracted by 0.4% q/q, reflecting soft global demand but the drop was much less pronounced than the 6.1% contraction in the prior quarter.

On the services side, the gap narrowed somewhat from 0.9% of GDP in Q3 to 0.8% in Q4. The improvement reflected faster growth in receipts (3.6% q/q) relative to payments (1.8% q/q) but the balance was still negative. The secondary income (current transfers) deficit also improved in the final quarter, to 0.5% of GDP from 0.7% in the Q3. The smaller deficit on the services and primary income accounts, however, was entirely offset by the widening of the primary income deficit, which captures income such as dividends and interest as the return on financial assets and compensation of employees for the contribution of labour to production activities, as it widened to 2.2% of GDP from 1.9% in Q3. Overall, the services, income and current transfers gap amounted to ZAR 265bn in Q4 and remained stable as a share of GDP at 3.5%.

Overall, uncertainties continue to prevail and the concerns about global trade have not abated. Despite the improvement in financial conditions, demand is still weak undermining exports. Economic growth in South Africa recovered in the final quarter but at a very modest rate of 0.6% and signals from PMI surveys suggest lack of a strong pickup of momentum in the first quarter so far.

• Labour instability at Transnet may have considerable negative implications

Trade unions at state logistics monopoly Transnet are seeking double-digit pay hikes that are inconsistent with the financial position of the company, the local media reported after the start of wage talks on Tuesday this week. The South African Transport and Allied Workers Union (SATAWU) is demanding a 17.5% cumulative hike in three years and the United National Transport Union (UNTU) wants 12% in the first year, ZAR 2,750 monthly housing allowance, a ZAR 2,950 medical aid allowance, no overtime limits and no retrenchments. Meanwhile, Transnet tabled a revised three-year offer of CPI plus 1% (4.5%) in the first year, and CPI plus 0.5% (5% increase) in years two and three.

While Transnet is pressed by the large debt burden at ZAR 130bn whose servicing costs ZAR 1bn each month, the company can ill afford labour unrest and prolonged instability where it already faces major constraints on service delivery that impedes economic growth. The labour strike at Transnet over wages in 2022 was estimated by Minerals Council of South Africa to cost more than ZAR 800mn daily in lost export revenue. Transnet employed more than 46,000 permanent workers in the 2023 financial year and the company spends an estimated 66% of its budget on compensation.

• US reportedly seek action from South Africa on expropriation act, race-based laws and SU enemies such as Iran
• Pretoria still unable to engage US officially due to lack of dedicated staff in the US Department of State

The week-long visit of a delegation from the Democratic Alliance (DA) to the US found how South Africa could mend its relations with the US, DA MP Emma Powell, who is the party's spokesperson on international relations and cooperation, told News24 in an interview. According to Powell, the administration of US president Donald Trump, who suspended all aid to South Africa last month, wanted a deal with the country on the Expropriation Act and on allegedly race-based laws as well as its enemies such as Iran. The delegation that traveled to the US was not an official government delegation, although the DA is part of the GNU. This delegation comprised Powell, the DA's Eastern Cape leader and MP, Andrew Whitfield, who is also the deputy trade and industry minister in the GNU.

Powell said the two DA officials met with the chairperson of the Foreign Affairs Committee at Senate and House, Democrats in the House, the chairperson of the African subcommittee, the National Security Council, Africa advisors at the White House, Secretary of State Marco Rubio's senior advisors at the Department of State, and a variety of think tanks, including the Hudson Institute. According to Powel, the US has hardened its position on South Africa. Powell claims that the US wanted the government to act on the Expropriation Act, on race-based laws, and on South Africa's relationship with their enemies such as Iran.

Powell said the visit to the US was a fact-finding mission because the DA did not want to waste time before the government can officially meet with representatives of the US. President Cyril Ramaphosa has stated several times that he wanted to engage the US diplomatically but this has not happened so far due to issues on the US side. There is simply no one to meet, there is no senior officials in place after 300 have been fired at the Department of State and there is currently no African Bureau in place in the State Department, South African ambassador to the US Ebrahim Rasool explained.

The DA has embarked on the mission to the US after the US suspended all aid and snubbed the G20 meetings in Johannesburg. US president Trump has voiced outrage about South Africa allegedly violating human rights and doing "terrible things." Afrikaner lobby groups, AfriForum and the Solidarity Movement have been widely accused of spreading misinformation in the US about South Africa's policies that are allegedly hurting the rights of white farmers in the country. In fact, the two organisations continue their meetings in the US at the current time although president Ramaphosa said these actions are sowing divisions in the country and that South Africa was a sovereign state that could solve its own problems.

Sappi prices €300m offering of senior notes (Business Day)

PETER BRUCE: Time for Steenhuisen to squeeze seriously hard (Business Day)

Radebe-led task team begins rebuilding ANC in KwaZulu-Natal (Business Day)

DA's US trip to 'stabilise diplomatic relations' irks Lamola (Business Day)

New rules for electricity prices to be revealed next month (News24)

DA meets with US leaders to stabilise diplomatic relations amid heightened tensions (News24)

Transnet and trade unions square up over wage demands (Moneyweb)

SA coal plants lift death rate by 6%, study shows (Moneyweb)

SA has taken no diplomatic action against AfriForum's misinformation campaign in US: DIRCO (Eyewitness News)

Ramaphosa, Cabinet set to visit CoJ, Gauteng govt amid continued service delivery struggles (Eyewitness News)

ANC's new committee chairs - more evidence the party just does not get it (Daily Maverick)

The Mkhize farm debacle - what else lurks in Ithala's loan books? (Daily Maverick)

South Africa's persistent trade deficit dilemma with China, and how to fix it (Daily Maverick)

• Confidence would have dropped with the sharp surge in new vehicle dealers' confidence
• Confidence is still consistent with some GDP growth in Q1
• However, substantial recovery in demand or a firm action on structural reform is needed for renewed growth in confidence going forward

The RMB/BER business confidence index stagnated at 45 points in the first quarter of 2025, the Bureau for Economic Research (BER) said in a release on Wednesday (Mar 5). Although confidence is still a notch above the long-term average of 43 points, it is worrisome that the freeze comes after three consecutive quarters of improvement. Adding to the concern is that four of the five sectors in the survey reported a deterioration in confidence which was offset by the 29-point increase in the confidence of new vehicle dealers. It seems that the new vehicle dealers whose confidence previously lagged behind, finally caught up with the rest in Q1. The BER interpreted the readings in the Q1 business confidence survey not as a bad outcome but as a signal that the improvement observed in the final quarter has stalled.

Data Download

Part of the deterioration in confidence levels reflected the concerns about the impact of South Africa's relations with the US which had already soured prior to the announcement of the suspension of all aid to South Africa. The BER noted that most of the responses to the survey were submitted right after US president Donald Trump announced the suspension of all aid which raised questions about the continuation of AGOA. Another source of concern for businesses was the announcement of the closure of ArcelorMittal's business as well as the state of the domestic demand. Another negative development in February was the shocking postponement of the budget and the implications about political stability. However, the BER said most of the responses were received prior to this event. With the budget expected to be tabled on Mar 12, this should not impact confidence in the second quarter.

Overall, the BER said that some of the results in the survey could be seen as a warning light and that without the sharp increase in new vehicle dealers' confidence, the RMB/BER index would have retreated at the start of the year. The BER said the consumer-linked sector still performed well in Q1 but it remained to be seen if this momentum could be sustained in the second quarter, considering that the boost from the two-pot retirement system withdrawals has faded and the interest rate is unlikely to move much lower in an environment of slightly rising inflation. The level of confidence in the first quarter is still consistent with some GDP growth following the 0.6% q/q expansion in Q4/24 but a renewed increase in confidence going forward would have to see a substantial recovery in demand and activity or firm action on the structural reform front, the BER warned.

• Credit rises by just 0.3% m/m as lending activity remains subdued
• Average lending rate eases to 16.5% but remains relatively high
• Credit activity has been subdued by high lending costs, increased govt borrowing

The credit to the private sector grew by 7.7% y/y in January, picking up from 6.7% y/y in December, according to data from the central bank. In m/m terms, the credit rose by just 0.3%, easing from the 0.5% rise in December and 2.3% in November. The commercial banks' credit to the private sector (commercial banks account for about 90% of total credit) grew by 5.1% y/y in January, also picking up from 4.0% y/y in December. Lending rates decreased but remained relatively high at an average of 16.5% in January. The NPL ratio improved to 3.9% at end-2024, which was due to improved loan recovery and reclassification of historical bad debts that debtors resumed servicing.

Data Download

Credit activity has been subdued due to the effect of the increased government borrowing on the domestic market, which has crowded out the private sector and has tightened lending conditions.

• Worsening reflects strong import growth driven by raw gold, food, chemicals
• Export growth is driven mainly by cocoa and gold
• Trade deficit is equivalent to about 4% of full-year GDP in Jul-Jan
• Gap is expected to remain sizeable over short term due to oil investment

Uganda's foreign trade deficit widened by 28.5% y/y to USD 241mn in January, according to data released by the central bank. Exports grew by 50.4% y/y to USD 859mn while imports grew by 44.5% y/y to USD 1,100mn. The increase in exports was largely driven by coffee (+82.9% y/y), processed gold (+77.9% y/y) and cocoa beans (+186.7% y/y), which was due to higher prices, but also higher volumes in some cases. The increase in imports was driven by private sector non-oil imports, and more specifically raw gold, vegetables products, rubber and plastics, and chemical products.

Data Download

The trade deficit in Jul 2024-Jan 2025, the first seven months of the fiscal year, widened by 156.5% y/y to USD 2,400mn due to the triple-digit rise in imports although exports grew at a strong rate too. The deficit accounted for about 4.0% of the full-year GDP projection, in our calculation, up from 1.7% for the same period of the preceding year. In full 2023/24, the trade gap was equivalent to 5.8% of GDP and is expected to remain under pressure over the short term from imports related to the oil sector development and infrastructure investment. It should start improving when the country starts producing oil in 2026.

• Import cover ratio inches up to 3 months but remains below EAC's 4.5 recommendation
• Reserves have been under pressure this year due to higher external debt service, lower worker remittances and aid
• CA is to remain sizeable this year but gradually decline over medium term

Uganda's gross foreign exchange reserves increased by 2.2% or USD 73mn m/m to USD 3,376mn at end-January, according to the latest data released by the central bank. Despite the increase, reserves were still 5.8% or USD 206mn lower in y/y terms, which could be attributed to the widening external imbalances, capital outflows, reduced external financing and rising external debt service. The import cover ratio inched up to 3.0 months in January from 2.9 in the preceding three months, but was still lower than the 3.4 recorded a year earlier. The ratio remains below the 4.5 recommendation of the East African Community (EAC).

Data Download

The CA deficit widened by 19.8% y/y to USD 3.3bn in Jan-Sep 2024, reflecting higher services imports (mainly transport and other business services) and interest payments, and the decrease in worker remittances and NGO aid. The trade balance improved a bit thanks to higher exports of coffee and gold. The CA deficit was equivalent to about 7.9% of the Jan-Sep GDP, in our calculations, up from 7.4% of GDP in 2023 (entire year). It is expected to remain sizeable at around 7-8% this year too due to the increased debt payments, capital outflow and the drop in aid. It is then seen to gradually decline in the years after the country starts producing oil, probably in 2026. The central bank expects the CA gap to narrow gradually to 3.6% in 2027/28.

Mulungushi Textiles Nears Operational Resumption as Machine Testing Commences (Lusaka Times)

CIF endorses USD 143 million for nature in Zambia, Malawi, Mozambique, Namibia, Tanzania (Lusaka Times)

Removal of 15% export duty on emeralds in Zambia's best interest - Minster Mulenga (Zambia Monitor)

Research institute report warns of growing debt crisis in local authorities, highlights ZMW 4.6 billion financial liabilities (Zambia Monitor)

Bank of Zambia conducts nationwide sensitization ahead of launch of new currency notes (Zambia Monitor)

We'll procure 630 cattle, 1,500 goats, 5,000 village chickens for stocking this year - FISHERIES and Livestock Minister (News Diggers)

Benefits of salary increments being swept away by high cost of living - ZCTU (News Diggers)

• Daphne Chabu to lead the Anti-Corruption Commission (ACC), tasked with strengthening transparency
• Mbololwa Wamunyima appointed as Human Rights Commission (HRC) Director-General to advance legal reforms

In a significant move to strengthen governance, President Hakainde Hichilema swore in Ms. Daphne Pauline Soko Chabu as the Director-General of the Anti-Corruption Commission (ACC) and Ms. Mbololwa Wamunyima as the Director-General of the Human Rights Commission (HRC). This development emphasizes the government's commitment to gender equality and reinforcing key institutional functions. Hichilema noted that Ms. Chabu's leadership at the ACC will significantly contribute to the country's anti-corruption efforts, while Ms. Wamunyima will further strengthen the HRC's oversight role, ensuring that human rights are respected and upheld in Zambia.

Ms. Chabu's appointment as head of the ACC places her at the forefront of initiatives aimed at enhancing institutional mechanisms, increasing transparency, and ensuring accountability within both public and private sectors. She is expected to work closely with other investigative bodies and law enforcement agencies in combatting corruption. On the other hand, Ms. Wamunyima's appointment to the HRC is expected to focus on human rights advocacy, legal reforms, and public awareness. Her leadership will be pivotal in promoting and protecting human rights, aligning with Zambia's international human rights commitments.

We note that in 2024, Zambia's Anti-Corruption Commission (ACC) underwent significant leadership changes. On Jul 16, President Hakainde Hichilema accepted the resignation of ACC Director-General Thom Trevor Shamakamba. This decision followed corruption allegations made by former board member O'Brien Kaaba, who accused Shamakamba and other senior officials of receiving payments to protect corrupt individuals. Subsequently, President Hichilema dissolved the ACC's board to "renew the [ACC's] sacred mandate." Regarding the Human Rights Commission (HRC), the position of Director has been vacant since 2024. These vacancies raised concerns among stakeholders about the capacity of these institutions to effectively combat corruption and protect human rights.

• Maize purchase target increased from 300,000 tonnes in 2023 due to improved crop forecast after last year's severe drought
• FRA facilitated maize imports of 100,000 tonnes from Tanzania amid drought concerns
• Government's 2027 production targets are 10mn tonnes of maize, 1mn tonnes of soya beans, and 1mn tonnes of wheat annually

The Food Reserve Agency (FRA) announced plans to purchase 1mn tonnes of maize grain in the current crop marketing season, a sharp increase from the 300,000 tonnes bought in 2023. FRA Board Chairperson Suresh Desai urged the Ministry of Finance to expedite funds for maize purchases to support farmers. The agency is assessing damaged storage facilities to rehabilitate them in preparation for this year's procurement. Desai indicated that purchases would likely commence in June and extend to October.

The government handed over 32 grain dryers valued at USD 1.48mn to FRA to mitigate post-harvest losses, which currently range between 30-40% among smallholder farmers, according to the Zambia Statistics Agency. The dryers, which can reduce maize moisture content from 18% to 12% in just 30 minutes, will be stationed in high-productivity areas to preserve grain quality. Minister of Agriculture Reuben Mtolo highlighted that the dryers are a key component of the Comprehensive Agriculture Transformation Support Programme (CATSP), aimed at improving food security and supporting the government's 2027 production targets of 10mn tonnes of maize, 1mn tonnes of soya beans, and 1mn tonnes of wheat. FRA acting executive director Justin Chuunka emphasized the agency's role in stabilizing grain supply during the drought period, establishing 1,804 maize selling points across Zambia and overseeing the importation of 100,000 tonnes of maize from Tanzania.

We note that Zambia's maize sector typically produces about 3mn tonnes annually while domestic consumption averages roughly 3.2mn tonnes under normal conditions, according to publicly available estimates. However, the severe drought during the 2023/2024 farming season forced production to drop dramatically to around 1.5mn tonnes, a decline of nearly 50% from average which resulted in an estimated deficit of approximately 1.7mn tonnes of maize needed to meet human and industrial demand.