Speculation over when an agreement between Egypt and the International Monetary Fund will be finalised has reached boiling point, with various forecasts being made. The most likely at the moment sees the nation securing the loan in December, and the first tranche of $4.5 billion (state-run newspaper Al Ahram said last week the loan amount was reduced from $4.8 billion – probably because of currency fluctuations) to arrive in January 2013.
Ashraf Swelam, the former economic advisor to failed presidential candidate Amr Moussa, says the debate is healthy, in this opinion piece featured in Ahram:
“The back and forth isn’t in itself a bad thing. For one, it shifts the focus from the political to the economic sphere which is in dire straits. In addition, public debate of the sort unfolding around the issue of the IMF deal is characteristic of democratic societies, and as such it should be celebrated and encouraged.”
But he does repeat a mantra often spoken about the Egyptian government; be more transparent about your negotiations.
“The complete absence of information about the details of the agreement… in turn opens the door wide open for unfounded suppositions and conspiracy theories.”
Swelam also repeats the political bullet points brought up under his tenure as economic advisor to Moussa. Hasn’t the day come for Egypt to seriously consider decentralisation and the financial and administrative empowerment of local communities? And, how are we going to address the mounting challenges of water, food, energy and environmental security?
His economic programme includes reviewing past privatisation deals, shifting emphasis to the private sector and moving money-losing state-owned institutions under a mega state-owned holding company with a chief executive. Such a programme would signal a move to a more profit-driven, capitalist model.
That certainly won’t sit easy with those (and there are many of them) against the IMF loan, who associate the international bank with harsh austerity measures years ago.
The BBC exposé on Mubarak’s billions has been translated into English. This is a thrilling (though at times sensationalist) BBC documentary about the Mubarak-era and Egypt’s stolen billions.
(N.B. Without stating the obvious, it should be noted that though many journalists work to high levels of integrity and morality, sometimes mistakes happen and reporters are careless. This has led the BBC’s director general, effectively the BBC’s editor-in-chief, George Entwhistle to resign over the weekend after a BBC Newsnight film alleged child abuse by an unnamed Conservative politician, which was proved to be unfounded. Such a huge accusation is a dangerous one to make. So, former Egyptian president Hosni Mubarak may be accused of having $70 billion stashed away in hidden accounts, but that would also make the man accused of chronic “mediocrity” the richest man on Earth. Doesn’t quite gel.)
Egypt’s inflation rate widened significantly to 7 per cent in the 12 months to October 2012, from 6.2 per cent in September, according to the government statistics agency. Though food prices rose, which is the standard cause for rising inflation, this time fuel prices played a big role.
The increase in natural gas and butane prices was the main driver behind the rise in inflation, staging a monthly increase of 57.8 per cent in October 2012 from September 2012, and 175 per cent since October 2011.
The Egyptian government had signalled it would start raising the price of energy consumed domestically and this indicates it may have already happened.
Egypt is struggling with a gas shortage because of an addiction to energy subsidies that has wiped out its resources domestically and forced it to use energy at home that it could have exported for much-needed hard currency.
One way to counter that is to immediately raise the price of fuel.
Though just anecdotal, there have been instances of increasing electricity bills and gas bills in households. Perhaps the government is quietly enforcing targeted price hikes in some areas to avoid public anger.
Some welcome relief came to Egypt when it completed its first licensing round since the 2011 revolution in a sign that international oil firms are (mostly) undeterred by a payment backlog of billions of dollars.
Royal Dutch Shell, RWE and TransGlobe Energy were among energy companies that won concessions in Egypt.
The results for this tender were seven months after the closing bids, after the date had been delayed to 29 March from 30 January to allow more companies to take part.
Though it is an indication that Egypt’s energy reserves are too lucrative to miss out, it does not mean the country is out of the woods just yet. Delays on tenders were because international interest was not that high after Egypt built up a backlog of payments to oil producers and premiums for fuel imports skyrocketed. It’s another consequence of a deep crisis impacting the energy sector in Egypt.
Iran, a country that has had to cope with severe international sanctions, has temporarily banned the import of some “luxury goods” including foreign-made cars and mobile phones to save billions of dollars for essential products in the face of worsening sanctions.
The currency has slid dramatically over the last 15 months as exports have fallen because of tighter and tighter western sanctions.
The government has responded to a wave of dollarisation, where Iranians have scrambled to convert their savings into dollars [and euros], by restricting access to hard currency, rationing the dollars which it supplies to companies and individuals through the central bank, and setting up an official foreign exchange centre.
If you thought transparency wasn’t good enough in Egypt, take Iran where among the “secrets” held by the government is the level of reserves.
The reserves stood at $106 billion at the end of last year, according to the International Monetary Fund. But some analysts estimate they may have dropped by several tens of billions of dollars as the sanctions have cut oil income, according to Reuters and Bloomberg.
“We will not produce a Salafi Ahmed Ezz,” said Bassam al-Zarka, who serves as vice president of the Salafi House of Business’s board of trustees and president of its executive committee.
The House of Business is a Salafi idea that will “connect investors with ideas, train entrepreneurs, and reinvest revenue in social-development projects, according to Salafi leaders associated with the organisation,” reports Ben Gittleson for Egypt Independent.
An interesting story on how Egypt’s Salafis are branching out into business, and bringing their ultraconservative interpretation of Islam into the world of modern finance.