Interpreting Middle East Economic News and Analyzing Market Trends

Category: Egypt

Egypt & Jordan: Taking away subsidies is proving more challenging than expected

Governments in the Middle East, regardless whether they have oil wealth or not, are being forced to rethink the subsidies they give to their citizens either to shore up their finances or to move along a more sustainable path.  We’ve discussed issues with subsidies in previous posts, here, here, here and here.  

 

Government’s in the region put themselves in the predicament they are in decades ago as a way to keep their citizens happy and give them a sense that their governments are doing something for them.  However, decades later and millions of people later, these governments are facing a financial crisis and no longer have a choice but to reduce subsidies.  In doing so, they are putting their survivability at risk as is the case with Egypt and Jordan (see below).

 

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Arab governments to inject billions into regional development banks

Arab governments realizing the need to step up investment efforts in the Middle East after the Arab Spring are pledging to inject new capital into the five main development banks in the region.  They are;

 

1.  Arab Fund for Economic and Social Development

2.  Arab Monetary Fund

3.  Arab Bank for Economic Development in Africa

4.  Arab Authority for Agricultural Investments and Development

5.  Arab Investment and Export Credit Guarantee Corporation

 

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Al-Azhar in power-grab with Brotherhood over Egypt’s proposed sukuk law

Egypt is the largest Arab and Muslim country in the Middle East, yet it never allowed for the establishment of Islamic banking rules and regulations.  Thank Mubarak for this.  One of the first item’s on newly elected President Muri’s agenda was the implementation of Islamic banking laws in Egypt.  It was especially critical to have these new laws in place in order for Egypt to tap the Islamic capital markets, which include the rapidly growing sukuk market (Islamic bond equivalent).

The country has been locked in a stalemate with the IMF over a proposed $4.8 billion loan, and it is currently locked out of international markets to finance in budget gap.  Being able to issue sukuk would alleviate some of this pressure since Egypt will have a better chance at finding investors in the region willing to invest in their sukuk.  Egypt’s upper house of parliament approved the new sukuk law only to come under fire by Al-Azhar University’s Senior Scholars Authority.  Al-Azhar is one of the oldest universities in the world dating back over 1,000 years, but has never been involved in state affairs until now.

 

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Libya considers giving aid to Egypt

Now here’s a story you would have never expected to see before 2011.  Here’s the article from the Voice of America:

 

Libya is considering extending financial aid to Egypt to help its North African neighbor overcome a severe economic crisis, Libyan Prime Minister Ali Zaidan said on Wednesday.

Egypt, which has endured more than two years of political instability since the overthrow of President Hosni Mubarak in 2011, is struggling with sliding currency reserves, falling tourism and a soaring budget deficit.

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Egypt close to default and Bahrain one step away from junk bond status

Cyprus has been dominating the financial news over the past two weeks.  The crisis seemed to come out of nowhere and rattle financial markets.  There are many questions that come up with events like these.  One key question is, did this crisis really come out of nowhere?  Another key question is, how can we spot potential crisis in the future?  What about the Middle East and the GCC in particular, are there any trouble spots?

 

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