Arab Today, arab today new egypt crisis threatens currency
Last Updated : GMT 08:26:46
Arab Today, arab today
Arab Today, arab today

New Egypt crisis threatens currency

Arab Today, arab today

Arab Today, arab today New Egypt crisis threatens currency

Cairo - Arabstoday

Growth in North Africa’s biggest economy has flatlined in the 16 months since the toppling of Mubarak’s 30-year regime. Currency reserves have halved, undermining the value of the Egyptian pound and troubling external creditors who are owed almost $6bn over the next 12 months, according to data from Bank of America/Merrill Lynch. Potential investors have been looking to this weekend’s presidential election to resolve the policy limbo and pave the way for aid and business finance. Instead, a court ruling this week dissolved parliament and ruled to keep Mubarak’s last premier in the presidential race. Political tensions have been delaying the unlocking of aid from the International Monetary Fund and keeping away foreign investors and tourists. Meanwhile Egypt’s balance of payments gap ballooned to $11bn in the first nine months of the 2011-2012 financial year, more than double year-ago levels. “It’s difficult to see political consensus forming and in the absence of that it’s difficult to see how you would get much support to plug external financial needs,” said Jean-Michel Saliba, Middle East economist at Bank of America/Merrill Lynch. “At the moment there is no parliament, no constitution and no president.” The news of the court ruling sent Egypt’s debt insurance costs soaring to three-year highs, meaning investors pay more now to insure exposure to Egypt via credit default swaps than during the uprisings that ousted Mubarak and other North African leaders. “Whatever the ultimate outcome of these (Egyptian) events, the political and policy-making process has been complicated, delaying the likely implementation of the comprehensive macroeconomic and structural reforms needed to kick-start recovery and ease financing strains,” said Richard Fox, head sovereign analyst for Middle East and Africa at Fitch. But most foreigners have already fled the market. Saliba reckons non-residents’ holdings of local treasury bills have fallen to $300mn from over $10bn in December 2010 and puts foreigners’ total equity exposure at just $3bn While Egyptian stocks, bizarrely, have been star performers this year, much of the 20% gain is thought to have been driven by locals. Oliver Bell, a portfolio manager at T Rowe Price, has owned no Egyptian equities since the start of 2011. “People were hoping the presidential election, regardless of who wins, would bring in a leader, someone the IMF could talk to,” he said. “Now all this is again delaying the point when real foreign investment comes back to the country.” Bell and other investors see little incentive to invest in Egypt. Politics aside, investors have been alarmed by the slowing economy; in contrast to average annual growth of 6% in the pre-Lehman years, gross domestic product (GDP) this year is seen growing barely 2%. Foreign direct investment has plunged to a tenth of year ago levels, data recently showed For stock and bond investors, much of the fear is linked to the currency. Forward markets are pricing up to a 30% devaluation for the Egyptian pound in the next year as the central bank reaches the bottom of its reserves war chest. Reserves, excluding gold, now stand at just over $12bn or a paltry three months’ import cover. While Gulf governments have offered some aid, including a Saudi $1bn deposit at the central bank, investors say this can only be a stopgap. “There will be some form of devaluation, it’s getting harder and harder to defend the currency,” Bell said. “If the stock market falls and the currency depreciates, you’ll get hit hard.” The crunch may not be too far off. July will be a crucial month as Egypt must repay $1bn in maturing Eurobonds and also $700mn in Paris Club debt. A default is not expected, says Kieran Curtis, a portfolio manager at Aviva Investors who holds the maturing dollar bonds. But he has hedged his exposure to the Egyptian pound because under the bond terms, the payout is based on the exchange rate.from gulf times.

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today new egypt crisis threatens currency Arab Today, arab today new egypt crisis threatens currency

 



Arab Today, arab today
Arab Today, arab today US, Britain ban laptops on flights

GMT 07:36 2017 Wednesday ,22 March

US, Britain ban laptops on flights
Arab Today, arab today Sheds light on major steps in 12-year career

GMT 06:07 2017 Monday ,27 February

Sheds light on major steps in 12-year career
Arab Today, arab today Hezbollah commander killed by own men

GMT 07:43 2017 Wednesday ,22 March

Hezbollah commander killed by own men
Arab Today, arab today Tunisian media host praises her new experience

GMT 12:35 2017 Wednesday ,15 March

Tunisian media host praises her new experience
View News in Arabic - Business: أسواق مالية
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Yemeni official warns education is under threat

GMT 12:03 2017 Tuesday ,14 March

Yemeni official warns education is under threat
Arab Today, arab today 2017 already marked

GMT 15:25 2017 Tuesday ,21 March

2017 already marked
Arab Today, arab today Prepares to give stargazers an eyeful

GMT 13:38 2017 Monday ,06 March

Prepares to give stargazers an eyeful
Arab Today, arab today Renault Trezor wins design award

GMT 11:56 2017 Tuesday ,21 March

Renault Trezor wins design award
Arab Today, arab today Palestinian police wage war

GMT 07:53 2017 Friday ,17 March

Palestinian police wage war
Arab Today, arab today Donia Abdel Aziz participates in "Game of Silence"

GMT 07:12 2017 Tuesday ,21 March

Donia Abdel Aziz participates in "Game of Silence"
Arab Today, arab today Mexico threatens to ditch US corn imports

GMT 10:34 2017 Tuesday ,21 March

Mexico threatens to ditch US corn imports

GMT 07:39 2017 Monday ,20 March

Dalia Mustafa believes in the presence of ghosts

GMT 19:27 2017 Saturday ,11 March

Boualsof launches "Priestess Kahina" collection

GMT 16:41 2017 Monday ,20 March

Preserving the memory of glaciers

GMT 19:45 2017 Monday ,20 February

Sarah Belamesh designs antiques of "ceramic"

GMT 13:11 2017 Tuesday ,21 March

Web-based counseling lowers blood pressure

GMT 17:08 2017 Saturday ,18 March

Reveals secrets of tourism flights to space

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons

GMT 22:39 2017 Thursday ,09 March

Zuhair Murad presents his new collection "Resorts"
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday