End Times and Current Events

Egypt's economic problems do have a possible solution: politics. But Egypt's politicians are failing.

2/25/13

Egypt's economy has a political problem. And its politics have an economic problem. And the two are feeding each other in dangerous and toxic ways that makes fixing either or both harder with each passing day.
 
On Sunday, the first trading day of the week, Egypt's benchmark stock index lost 0.83 percent, wiping 5.2 billion pounds ($760 million) of value from the country's publicly traded companies as political opposition to a drawn out, four-stage parliamentary election process, concocted by the country's ruling Muslim Brotherhood last week, mounted.
 
In theory, parliamentary elections could help break the country's current impasse, in which elected President Mohamed Morsi and his Muslim Brotherhood hold almost all of the formal political power in the country, but in which the nation's various other factions and political movements, from socialists to secular-leaning free-market-favoring politicians, are not participating and are agitating to return to the drawing board once more. Some prominent opposition politicians, like Mohammad ElBaradei, have already been calling for a boycott of the polls, scheduled to begin in late April and run through the end of June.

And even if the elections go forward as scheduled, they guarantee further political turmoil and uncertainty through the middle of the summer, at a time when Egypt's economy can ill afford it. The country's foreign currency reserves fell to $13.6 billion at the end of January, from $36 billion at the start of the uprising against Hosni Mubarak two years ago. That 62 percent decline in hard currency on hand is the simplest measure of the collapse in Egyptian investment, tourism, and international faith in Egypt's new leaders to turn around the situation as you'll find.

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http://news.yahoo.com/egypts-economy-collapsing-no-one-stopping-185851053.html

http://www.reuters.com/article/2013/02/27/egypt-deficit-idUSL6N0BR8X720130227?feedType=RSS&feedName=marketsNews&rpc=43

2/27/13

UPDATE 1-Egypt govt deficit soars in 7 months to end-Jan -MENA

Feb 27 (Reuters) - Egypt's government deficit rose by more than a third in the seven months to the end of January from the same period a year earlier, state media reported on Wednesday.

Two years of political turmoil has battered state finances by driving away foreign investors and tourists, and a sharp fall in the Egyptian pound has pushed up the cost of subsidies for imported energy and food.

The deficit hit 119.8 billion Egyptian pounds ($17.8 billion) in the first seven months of the fiscal year, which begins in July, compared with 88.2 billion a year earlier, the state news agency MENA said.

Citing a finance ministry report, it said the figure equalled 6.7 percent of annual gross domestic product (GDP).

In a revised economic reform plan, the government said it is targeting a deficit for the whole financial year to June of 189.7 billion pounds, or about 10.9 percent of total economic output. However, this factored in economic reforms and it forecast the deficit would hit 12.3 percent of GDP without action.

Cairo has said it will reopen negotiations early next month on a $4.8 billion loan from the International Monetary Fund to bolster its finances. Foreign currency reserves have also fallen to critical levels.

http://www.reuters.com/article/2013/02/28/egypt-wheat-usa-idUSL1N0BSI3Y20130228?feedType=RSS&feedName=industrialsSector&rpc=43

2/28/13 Egypt recently tapped U.S. credit guarantees to buy wheat -USDA

* First use of US credits for wheat this year

* Egypt is world's largest wheat importer

WASHINGTON Feb 28 (Reuters) - Egypt recently used U.S. export credits to pay for a U.S. wheat purchase, its first use of the guarantees for the food grain this year, the U.S. Agriculture Department said on Thursday.

The credits were tapped as concerns were rising among bankers about the ability of Egypt, the world's largest wheat importer, to meet its needs through its traditional methods of public tenders and letters of credit.

Created to facilitate U.S. farm exports, USDA's export credit guarantee program, known as GSM-102, assures lenders they will get paid even if a borrower defaults. The short-term credits cover up to 98 percent of the principal and a portion of the interest.

USDA said $17.7 million worth of wheat was sold to Egypt in the past couple of weeks through the export credit program. A spokeswoman was unable to provide the specific date.

The amount of credits used correlates closely with a 60,000-tonne cargo of U.S. soft red winter wheat reported on Feb. 20. The cargo, for April shipment, was sold by Venus at $296.75 per tonne.

However, the same company on Feb. 2 sold another 60,000 tonnes of SRW wheat to Egypt for March shipment at $306.80 per tonne.

Credits were also issued for $20 million of soybean oil and $9.8 million of soybeans earlier in the fiscal year, which started Oct. 1.

The wheat purchased under the credit program represents a fraction of the 1.1 million tonnes sold to Egypt during the marketing year that ends on May 31.

During the previous fiscal year, USDA credits were used for $98.3 million of soybeans and $13.1 million of wheat to Egypt. USDA typically reports the destination of exports but not the name of the buyer.

http://news.yahoo.com/egypts-urban-inflation-jumps-due-pounds-slide-080408689--business.html
3/11/13
Egypt inflation jumps as currency slides, hurting poor

CAIRO (Reuters) - Egyptian inflation has leapt as a sliding local currency pushes up food prices, badly hurting the poor who are suffering most during the country's economic, political and security crisis. Illustrating the squeeze on living standards since Egypt's 2011 revolution, data on Sunday showed prices in towns and cities rose 8.2 percent in the year to February, sharply higher than the 6.3 percent the previous month.
Economists blamed turmoil on Egypt's streets and in politics which has undermined economic confidence and pushed the Egyptian pound lower, inflating the cost of imported food. On Saturday alone, protesters torched buildings and two people died in Cairo in pitched battles with police, a force widely hated for its brutality during the rule of Hosni Mubarak and still unreformed two years after his overthrow. EFG-Hermes economist Mohamed Abu Basha said inflation may accelerate yet further as the Islamist government of President Mohamed Mursi struggles with the wave of violent protests and chaos in the election process.

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http://www.reuters.com/article/2013/03/13/egypt-food-idUSL6N0C5DKT20130313?feedType=RSS&feedName=nonCyclicalConsumerGoodsSector&rpc=43
3/13/13
Food price rises put restive Egypt on edge

* Egyptian pound down over 8 percent since December

* Subsidies keep down prices of some staples for poor

* But costs of other foods climb

* Weak economy means firms hesitate to pass on costs

* Egypt's history of bread riots complicates decisions

By Sylvia Westall and Tom Perry

CAIRO, March 13 (Reuters) - With croissants, baguettes and bagels spilling off metal trolleys at the bakery where Mohammed Alif works in central Cairo, food is not scarce, but profits certainly are.

The Egyptian pound has lost more than 8 percent of its value against the U.S. dollar since the end of December as concern deepens about the state of the economy, which is being undermined by political instability and rioting.

This, along with a general rise in global food prices, has pushed up the amount which bakeries like Alif's have to pay for imported ingredients traded in dollars, which in turn risks feeding back into discontent with the new leadership.

The spectre of steep food price inflation driven by a weaker pound is of particular worry to President Mohamed Mursi as he grapples with spasms of unrest two years after the uprising that toppled Hosni Mubarak and was itself partly driven by a sense of mounting economic hardship in a country long steeped in poverty.

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Egypt’s Real Disaster: Away From Political Turmoil, an Economy in Free Fall
http://news.yahoo.com/egypt-real-disaster-away-political-turmoil-economy-freefall-221546074.html
7/15/13

As interim Egyptian Prime Minister Hazem al-Beblawy works to fill out his fledgling Cabinet and return the country to something resembling stability, one of his most immediate challenges will be a task he, in theory, should be ably qualified to handle.

Al-Beblawy, a career economist and former Finance Minister, has assumed the reins of a country in economic free fall. The value of the Egyptian pound has plummeted to record lows, foreign-currency reserves have dropped to less than half of the $36 billion held by the regime of former dictator Hosni Mubarak before he was ousted in February 2011. The budget deficit has climbed to more than 11% of the country’s GDP. Tourism, one of the anchors of Egypt’s foreign-currency cash flow, has never truly recovered from the 2011 revolution. Early signs from the beginning of 2013 showed a steady increase in the number of tourists over the previous two years. But many of those have been attracted by bargains offered by hotels slashing their prices to maintain occupancy numbers. And each new round of political unrest scares away another month or two of visitors.

The situation may actually be even worse than the metrics that define it. Former Supply Minister Bassem Ouda, a Muslim Brotherhood member who resigned when former President Mohamed Morsi, a longtime Brotherhood official, was ousted by the military on July 3, warned last week that Egypt has less than two months’ supply of imported wheat left in its stocks — raising the prospect of a serious disruption in Egypt’s vital subsidized-food structure.

The prospect of a wheat shortage is particularly disturbing. Egypt is the world’s largest net importer of wheat, and a steady supply of affordable subsidized bread is a mainstay of the local diet. In the 1970s the late President Anwar Sadat attempted to raise the prices of subsidized bread; the result was several days of unprecedented protests and unrest that are now referred to as the bread riots.

Into this economic maelstrom steps al-Beblawy, 76; his appointment last week was almost universally praised by the international economic community.

“He’s very well known and well respected. And he’s a wise man,” said Ragui Assaad, an Egyptian-born professor of public policy at the University of Minnesota’s Humphrey School of Public Affairs. Assaad briefly worked alongside al-Beblawy at the Economic Research Forum, an Egyptian economic think tank, and the ERF’s managing director Ahmed Galal is currently one of the main contenders for the job of Finance Minister in the new government. “This could be one of the best Cabinets we’ve seen in terms of the economic team in years. But obviously it’s not going to be a Cabinet with a long-term mandate,” Assaad said.

Al-Beblawy served briefly as Finance Minister in 2011 when the country was run by the Supreme Council of the Armed Forces. But he resigned in October of that year after just four months on the job in protest over a violent clash with the military that left 26 protesters — mostly Coptic Christians — dead. Al-Beblawy, a Muslim, said at the time that responsibility for the deaths “lies, ultimately, with the government.”

During his short tenure, al-Beblawy was primarily charged with negotiating with the International Monetary Fund over a $4.8 billion emergency-aid package — a deal that still remains uncompleted two years later. Each new wave of political unrest has seemingly delayed the negotiations further and in December 2012 — in the midst of a national crisis over the constitution — Morsi’s government announced and then abruptly repealed a package of tax increases designed to appease the IMF.

Angus Blair, president of the Cairo-based economic think tank the Signet Institute, said he was originally skeptical of al-Beblawy two years ago but was quickly won over. “He’s a bit of a tiger. He’s young at heart, he knows Egypt’s problems, and he’s got the will to tackle them,” Blair says.

Much of al-Beblawy’s most immediate workload has centered on filling out his cabinet — a process that will likely involve as just as much speculation, leaks and rumors as the process that preceded his own appointment. Mohamed ElBaradei — who was himself poised to become Prime Minister before a sudden 11th-hour reversal last week — was sworn in Sunday as interim Vice President for International Affairs. Most of the rest of the cabinet lineup remains in flux, although Nabil Fahmy, former Egyptian ambassador to the U.S., did officially accept the post of Foreign Minister on Sunday.

Al-Beblawy appears to be beginning his tenure on a wave of goodwill — some of it is based on his personal reputation and some just for the fact that he represents a fresh start after Morsi’s disastrous and divisive one-year reign.

“There’s already a positive vibe in some circles … but we do need to see some positive actions,” said Mohamed Abu Basha, an economist at the Egyptian investment bank EFG-Hermes. “In the very short term there’s little the government can do to change things. What they can quickly do is regain that [investor] confidence a little.”

Even before al-Beblawy was named Prime Minister, Egypt received a much-needed boost in the form of a combined $12 billion in loans and gifts from Saudi Arabia, Kuwait and the United Arab Emirates — all of them are eager to replace Qatar as Egypt’s primary petropatron. But Abu Basha said the IMF loan still remains a critical goal because it represents a crucial international green light for Western governments and investors to pump in further aid and investment.

While easing the sense of economic emergency and buying al-Beblawy some room to maneuver, the new wave of Gulf money represents a temporary reprieve, not a long-term solution. Abu Basha estimated that Egypt would require as much as $35 billion to stay afloat over the next two years. “It’s a decent amount of money, but it’s maybe a third of what Egypt will need,” he said.

Al-Beblawy is going to be counting on all of that goodwill and confidence going forward since one of the first items on his economic agenda involves some painful steps that successive Egyptian governments — dating back to Mubarak — have consistently avoided. For years economists have pointed to Egypt’s massive public-subsides budget — for both cheap fuel and basic food staples — as a mountain that simply had to be climbed in order to modernize the Egyptian economy. Assaad estimated that the government spends up to $15 billion per year on providing gasoline to its citizens at well below international prices.

“That’s just insane when you have this level of budget deficit,” he said. “There’s no way they’re going to solve the budget without tackling energy subsides. But that requires a somewhat credible Cabinet and government to do that.” Such potentially unpopular austerity measure requires broad political consensus as a cover. Morsi never managed to create this kind of consensus — his critics deride his tenure as one in which he sought to consolidate Islamist political power rather than build national unity.

Ironically, by alienating vast swaths of the country during a single year in office, Morsi, who remains detained by the military in an undisclosed location, might have paved the way for a new regime to institute galvanizing reforms. But with Egypt’s economic and political life still tied to its volatile street, the hard work has just begun.

http://www.nbcnews.com/travel/unrest-delivers-huge-blow-egypt-tourism-6C10974919?ocid=msnhp&pos=4
Unrest delivers huge blow to Egypt tourism
8/22/13

Heshmat Youssef used to make a decent living sailing foreign tourists down Egypt's Nile River. Since political unrest flared, business has dried up faster than water in the desert.

Riots and killings that spiked after the Aug. 14 crackdown against followers of ousted President Mohammed Morsi have delivered a severe blow to Egypt's tourism industry, which until recently accounted for more than 11 percent of the country's gross domestic product and nearly 20 percent of its foreign currency revenues.

The chairman of the Egyptian Airports Company, Gad el-Karim Nasr, said arrivals at Egyptian airports have dropped by more than 40 percent from Sunday through Tuesday compared to the same time the previous week. He said that in the same time-frame, 13,000 tourists, mostly from Germany and Italy, have left the Red Sea resorts of Sharm el-Sheikh and Hurghada — with only 3,000 new arrivals.

With governments in the U.S. and Europe advising their citizens to avoid Egypt, the impact threatens the livelihood of the one in eight Egyptians who earn their money from tourism.

"We want to live in stability and for tourism to come back," said Youssef, who hasn't seen holidaymakers in weeks. "Let us eat already. We are extremely tired."

The latest shock occurred just as Egypt's tourism industry, which injected more than $10 billion into the economy last year, was slowly recovering from the blow suffered from the 2011 uprising against ousted President Hosni Mubarak.

That uprising had already prompted some U.S. operators to pull out of Egypt.

But the drop in U.S. visitors, who favor ancient monuments like the Pyramids outside Cairo and the tombs and temples of the Nile Valley, did not affect the resilient European market. Every year millions of sun-starved Europeans swarm the Red Sea beaches far from the chaos of the cities.

Now, the European market, too, is drying up.

Major European travel companies have canceled bookings through October after televised scenes of chaos and European governments' warnings to avoid Egypt.

"We have canceled all trips to Egypt until Sept. 15," said Anja Braun, a spokeswoman for TUI, one of Germany's biggest travel operators, said the company has canceled all trips to Egypt until Sept. 15. Customers can either rebook a trip to a different destination free of charge or get their money back, she said.

Costa Crociere SpA, one of Italy's main cruise operators, has canceled all Red Sea cruises and stops in Egypt through the 2013-2014 winter season.

In France, the Association of Tour Operators suspended tours to Cairo, the Red Sea and all other cities until further notice.

Even the lucrative Russian market, which accounted for the largest share of foreign tourists at 14 percent, is feeling the effects.

However, relatively few Russians, Germans, Italians, Serbs and others who were already at their beach resorts when violence escalated this month chose to leave early. Tour operators in Slovenia, the Czech Republic, Denmark, Sweden and Norway did fly hundreds of vacationers back home early — sometimes to the dismay of the tourists who said the resorts were quiet and they didn't want to leave.

"There will be losses on all sides, from the souvenir vendors in Egypt to the hotel and bus operators and airlines to the travel agencies in Germany," said Torsten Schaefer of the German Travel Association. "It's too early to say how high the losses will be, but certainly there will be massive cuts for the population in Egypt and livelihoods will be destroyed."