|
The Egyptian stock markets
will remain closed until February 8, but banks are now open and customers
have queued up 100-deep to pull out cash. Withdrawals are limited to $10,000
a day and 50,000 Egyptian pounds (about $8,500 and falling fast).
Please consider Egyptians Line Up
for Cash as Banks Open, Pound Falls
Hundreds of Egyptians queued
outside banks to withdraw funds as lenders opened for the first time in more
than a week amid protests demanding the ouster of President Hosni Mubarak.
The pound dropped to the lowest level since 2005.
The pound weakened 1.3 percent to 5.9330 against the U.S. dollar, the lowest
level since January 2005, at 5:07 p.m. in Cairo, from 5.857, according to
data compiled by Bloomberg.
The central bank published on its website a list of more than 200 bank
branches resuming operations today between 10:00 a.m. and 1:30 p.m. Customers
are allowed to withdraw up to 50,000 Egyptian pounds and $10,000 a day.
Yields on Egypt’s bills may surge about 30 percent, said Shahinaz Foda,
the head of treasury at BNP Paribas Egypt. Credit Agricole CIB expects the
pound to slump 20 percent in the “short term.” The
currency’s three- month non-deliverable forwards rose to a record last
week, suggesting the currency may fall more than 7 percent against the
dollar.
Yields on three-month treasury bills should be “not less than”
12.5 percent in upcoming auctions, up from 9.5 percent last month,
Cairo-based Foda said yesterday. The yield on the one-year bills may climb to
14 percent from 10.6 percent, she said.
John Sfakianakis, chief economist at Banque Saudi Fransi Credit Agricole
Group, said in a note Feb. 3 “Over the short term we expect the
Egyptian pound to fall by 20 percent, which would require the central bank to
intervene on several occasions.”
Egypt to Become Oil Importer
The Oil Drum had an interesting article last week about Egypt's energy and
fiscal situation. Please consider What's Behind Egypt's Problems?
We have all been reading
about Egypt in the newspapers, and wonder what is behind their problems. Let
me offer a few insights.
At least part of Egypt’s problem is the fact that in the past the
government has threatened to reduce food subsidies. Now it is planning to
hold food subsidies level and raise energy subsidies, but it is not clear
that the dollar amount of subsidy will be enough. The government is taking
steps to make food and energy affordable for most, but there is worry that
the steps being taken will not be enough.
Egypt’s Declining Financial Situation
There is a good reason why one might expect Egypt to
shttp://beta.blogger.com/img/blank.giftart running into problems with energy
and food subsidies. Its own financial situation is declining at the same time
that the cost of food imports is soaring. If we look at a graph of Egyptian
oil imports, exports, and consumption (using a graph from Energy Export Databrowser, which graphs BP
Statistical Data), we find that Egypt’s oil use has been rising
rapidly, at the same time the amount extracted each year is declining.
Starting about 2010 or 2011, Egypt will change from an oil exporting nation
to an oil importing nation, if there are imports available on the world
market. The catch is that Egypt isn’t the only one with declining oil production–world
oil production has been approximately flat since 2005, and the countries that
produce the oil are using more and more of it themselves. The result is that
there is less oil available for export, even as countries like Egypt need more.
The oil that Egypt exports provides funds for the subsidies that it offers,
so reduced exports mean less funds are available for subsidies.
...
Egypt is reported to be the world’s largest importer of wheat. In 2010,
the oil minister stated that Egypt imports 40% of its food, and 60% of its
wheat. The problem this year is that world wheat production is down (at least
in part due to weather problems in Russia) so world exports are down.
The
Oil Drum article also addresses natural gas, energy subsidies, population
growth, and other Egyptian budget pressures. It's an excellent article, well
worth a closer look.
Mish
GlobalEconomicAnalysis.blogspot.com
To sign up for a free
copy of Sitka’s Monthly Client Newsletter, please register your
email address at the bottom of the Sitka Pacific Commentary Page.
Mish's Global Economic Trend Analysis
Thoughts on the great
inflation/deflation/stagflation debate as well as discussions on gold,
silver, currencies, interest rates, and policy decisions that affect the
global markets.
|
|