Archive for Political turmoil

Egypt's central bank introduced a new auction system for buying and selling US dollars to help conserve foreign reserves, which it said had reached a critical level.

Political turmoil over the last month has prompted a rush by investors and ordinary citizens to switch their Egyptian pounds into foreign currency on concerns the government might devalue or bring in capital controls. 

The central bank has spent more than US$20 billion in foreign reserves to support the pound since a popular uprising toppled Hosni Mubarak in early 2011 as turmoil has chased away tourists and foreign investors.

Reserves fell by $448 million in November to $15.04 billion, enough to cover barely three months of imports, and bankers said the rush to buy dollars was certain to have drained foreign reserves even further in December. The bank is expected to report December figures in the first week of January.

"The current level of foreign currency reserves represents the minimum and critical limit," the bank said on its website on Saturday.

"This requires their being conserved for critical uses, as represented in fulfilling foreign debt obligations to preserve Egypt's reputation in international financial markets and to cover imports of strategic commodities," it added.

The new system will take effect as of Sunday, 30 December, and run alongside and not affect the current interbank currency market, the bank said.

It said the auctions would be held regularly and that banks would be asked to submit bids but gave few other details.

Egypt said it would continue to meet installments and interest payments on its foreign debt and allow transfers by foreigners who had invested on the stock exchange.

The central bank said the banking system's finances remained "strong and secure" but called on Egyptians to "rationalize their use" of foreign currency and not to speculate.

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Economic Times
Gulf bank gives Libya vote of confidence
Financial Times (blog)
After weeks of political turmoil since the killing of US Ambassador J. Christopher Stevens, Libya's economic prospects received a boost of confidence with news that a Dubai investment bank was buying a local financial services company. Arqaam Capital
Libya's Rashad bought by ArqaamThe North Africa Post

all 28 news articles »

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Egypt's pound was bid at 6.0507 to the US dollar on Wednesday, its weakest in more than seven years, following a week of political turmoil.

Over the last few days, the country's new Parliament has been dissolved, both candidates have declared victory in last week's presidential election runoff and the drawing up of the country's new constitution has floundered as politicians bicker.

The Egyptian currency later strengthened to 6.0495 to the dollar, which was still weaker than its close of 6.0470 on Tuesday.

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Egypt's economic growth will slow to under two percent this year from 2.5 per cent last year because of political turmoil, the Central Bank governor said on Sunday.

"We have a revolution," Farouk al-Oqda told Reuters when asked why growth would slow. He did not elaborate.

Oqda was speaking on the sidelines of a meeting of officials from the Arab Monetary Fund and central banks in the region.

In April, the International Monetary Fund forecast Egypt's gross domestic product growth would slow to 1.5 percent in 2012 from the 1.8 percent which it estimated for 2011. Political uncertainty since the ouster of President Hosni Mubarak in February 2011 has stifled investment and hurt trade.

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Egypt's foreign reserves rose by $302 million in May, their second successive monthly increase after having fallen every month since the uprising that ousted Hosni Mubarak in early 2011.

Foreign reserves climbed to $15.52 billion at the end of May from $15.21 billion at the end of April, the Central Bank said.

Reserves had tumbled by more than half since Egypt's political turmoil scared away tourists and investors, two of Egypt's main sources of foreign currency.

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Egypt's El Sewedy Electric, the Arab world's biggest listed cable maker, on Wednesday reported a 44-percent drop in its 2012 first quarter consolidated net profit which it blamed on political turmoil in its main Middle East markets.

Net profit fell to LE102.7 million (US$16.99 million) from LE182.8 million in the first quarter of 2011, the company said. Turnover fell by 3 percent to LE3.5 billion.

Analysts say the firm cut some production due to weaker demand for wires and cables in Egypt, which is going through a bumpy political transition, and Syria, racked by conflict.

A company official said Syria output was 30 percent of capacity there.

"The results are below our estimates," said Essam Abdel Aleem, an analyst at Naeem brokerage. "We are expecting lower profits through 2012 mainly because of the unrest in Syria, which forms 15 percent of the company's assets, and instability in Egypt."

Sewedy, which has production plants in Egypt and 10 other countries, also makes windfarm equipment.

The company said it expected revenue levels in 2012 to be similar to those of 2011.

"We expect a marked improvement in Egypt in 2013 once the presidential elections are behind us with political stability restored and the focus back again on infrastructure spending," said Chief Executive Officer Ahmed El Sewedy.

Sewedy shares inched down 0.1 lower percent on Wednesday while the benchmark index closed fractionally higher.

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DUBAI — Egypt needs to do more to secure a US$3.2 billion loan from the International Monetary Fund, including gathering broad political support and identifying other sources to finance its funding gap of up to $12 billion, an IMF official said on Wednesday.

Masood Ahmed, IMF director for the Middle East, told Reuters that Egypt still needed to do "some technical work" to finalize its economic program.

Asked whether he thought there was enough domestic political support for the program, Ahmed said: "I think that process [of getting political support] is advancing but I do not think we are at the point yet where we could move forward.

"There's still more work to be done to close down those three areas," he said, referring to the economic program, political support and alternative financial sources.

"We are ready as soon as pillars are there for that program to move forward relatively quickly," Ahmed said after presenting the regional economic outlook in Dubai.

Egypt and the IMF are in discussions on a $3.2 billion loan program, which Egypt had requested earlier this year but which had been opposed by the powerful Muslim Brotherhood's Freedom and Justice Party.

Egypt's $236 billion economy has been laid low by 18 months of political turmoil.

Last week, Parliament overwhelmingly rejected the army-appointed cabinet's plan to cut state spending, hampering the government's efforts to secure IMF help needed to avoid a fiscal crisis and potential currency devaluation.

"Egypt has pressing economic and financial challenges and that's why we believe it is important to move forward now to finalize the content of the program, to get support for it and to mobilize the financing for it," Ahmed said.

The country's finance minister said last week the government expected the fund's aid to start flowing from May.

The IMF is insisting that any agreement on financing is backed by Egypt's government and political partners ahead of the presidential election later this month. This would ensure the deal would outlast the political transition following the polls.

The IMF expects Egypt's inflation-adjusted economic growth to ease to 1.5 percent this year, which would be the slowest pace since a 0.3 percent expansion in 1992 and down from 1.8 percent in 2011. Its fiscal gap should widen to 10 percent of gross domestic product in 2012, from 9.9 percent last year.

Egypt has said it expects Saudi Arabia to deposit $1 billion at the Egyptian Central Bank by the end of April as part of a $2.7 billion package to support Egypt's battered finances.

Egypt's foreign reserves have tumbled by more than $20 billion to $15 billion during a year of political turmoil following the ouster of Hosni Mubarak.

Yemen aid

Ahmed also said the IMF would consider further aid for Yemen after approving a $93.7 million loan for the poorest country in the Arab world in April, which was aimed at addressing an urgent balance of payments deficit.

"It's hard to say yet [what the financing needs will be]. But clearly the financing requirements for Yemen to embark on the program of expanding employment and the economy will be significantly larger than the current phase of how to stabilize the economy after the crisis," he said.

Yemeni officials have previously said the public sector would play a key role in job creation as the country attempts to stave off economic collapse after 15 months of political turmoil that saw President Ali Abdullah Saleh forced from office.

"In that context, that they move to the medium-term strategy the IMF would also consider how to support and accompany them during that process, including by providing financial support over a longer-term period and with amounts that are likely to be larger than the amount, we had so far provided for the immediate stabilization," he said.

"The fiscal situation deteriorated significantly, this year, we believe it will stabilize," Ahmed said.

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Egyptian mobile phone operator Mobinil posted a quarterly net loss of LE177 million, blaming political turmoil in the wake of the uprising that toppled former President Hosni Mubarak.

Mobinil posted net income of LE342 million in the same quarter of 2010, it said in a statement.

"The results clearly illustrate the extent of the challenges the business was facing in a turbulent political, social and economic environment," chief executive Yves Gauthier said on Monday.

Political turmoil following the overthrow of Mubarak froze business activity in Egypt. Also, Mobinil was hit by a drop in subscribers who took offense at a cartoon tweeted by the firm's founder in June.

Business tycoon and politician Naguib Sawiris had tweeted a cartoon of Mickey Mouse with a long beard, and Minnie Mouse veiled in black.

Some people considered the cartoon offensive to Islam, prompting some Muslims to call for a boycott of Mobinil.

The firm said on Monday it was confident "improvements in the general environment and the normalization of the competitive landscape" would put it in a position to deliver better results.

It said it would deploy several initiatives to stimulate growth but did not elaborate.

Mobinil said revenue in the fourth quarter of 2011 was LE2.54 billion, and that its earnings before interest, taxes, depreciation and amortization (EBITDA) were LE598 million.

The number of subscribers at the end of 2011 was 32.9 million.

Shares in Mobinil closed down 5.1 percent on Monday. The main index was up 0.8 percent.

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