Interpreting Middle East Economic News and Analyzing Market Trends

Category: Egypt

Qatar says no more aid to Egypt, IMF loan still on hold, expect pound to resume decline

Last December, Qatar injected $2.5 billion ($500 million of which was gifted) into Egypt to support the pound as foreign currency reserves dried up.  Qatar has been actively helping Egypt since the revolution in 2011.  To date, Qatar has given $5 billion in aid to the country.  According to Reuters, Qatar will not give Egypt any more aid for the time being.

With Egypt’s sugar-daddy taking time off for now, who will step in to help?  The IMF is eager to give Egypt $4.8 billion in aid (with many strings attached), who else will come to the rescue?

Chart forUSD/EGP (USDEGP=X)

 

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The history of money beginning in Egypt and the difference between money and currency

Here’s a multi-part series produced by GoldSilver.com.  The first episode below discusses the early forms of money in Egypt.  It then goes on to explain the difference between currency and money.

  

 

 

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Egypt is being strong-armed into accepting IMF loan

Egypt is being pressured by the US and International Monetary Fund (IMF) into accepting a $4.8 billion loan.  Egypt badly needs financial assistance in order to get its economy going again.  However, the terms of the IMF loan are unacceptable, unrealistic and will do more harm than good.  They also go against the IMF’s praise of Egypt’s economic reforms just before the Arab Spring.  The IMF, however, does not care.  This international organization has a history of always collecting its loans…. and Egypt has some good assets to take in case of default.

   

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Egypt’s shrinking foreign currency reserves, devaluation is inevitable

Two years since the revolution in Egypt threw out Hosni Mubarak, the Egyptian economy is still attempting to recover.  Recovery has a long way to go.  Recent news of a run on the Egyptian pound sheds some light on the predicament the country faces:

 

A run on Egypt’s pound has left foreign currency in short supply and driven some dealers into the streets in search of people with U.S. dollars to sell, spawning a new black market.

The currency’s decline was triggered by a political uprising that swept Hosni Mubarak from power in 2011 and it has officially lost 8 percent of its value since Dec. 30.

Black market rates are even weaker, a sign that although the central bank managed to stem the slide in official trade last week, Egyptians are nervous about holding on to pounds.

Some dealers tout discreetly outside regulated foreign exchange bureaux and banks in Cairo, illegally offering a better rate to those looking to sell hard currency.

“There are no dollars. Everyone that walks in asks for dollars but supply is scarce,” said one of the dealers.

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Gulf banks go shopping in the MENA region

After four years of slow growth or no growth, banks in the Gulf are looking for ways to expand their market reach.  Banks in cash-rich Qatar can only grow so much in their tiny home market, whereas banks in the UAE have a larger customer base to work on.  However, banks in the UAE have been revering from the property bubble and per Central Bank statements, need to reduce their exposure to the government (see older post).

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