Investors
bought less a third of the 3.5 billion Egyptian pounds (US$580 million) worth
of Treasury bills offered to the market on January 22, and that is not the
first time that the investors turned a cold shoulder to Egyptian debt even at
the exorbitant rate that was offered (nearly 16%)
Last month was disastrous as
well, Raza Agha an economist at RBS estimated that more than $4 billion left
the country during the month, he noted that the December drop in reserves was
cushioned by a $1 billion loan from the Egyptian army and a $1 billion sale of
dollar-denominated treasury bills.
Finally Standard & Poor's
lowered its credit rating on Egypt which is another factor of why did the cost
of government borrowing rose to its highest in three years.
With all the above not so
great news, did Egypt finally hit rock bottom
in its financial position? Certainly the inability to borrow in the
money markets is a little more than a shy suggestion that things are getting a
little out of control, but is this all?
Since the revolution and the
political unrest that followed, a substantial multilateral and bilateral
support was announced in June 2011, totaling up to 30 billion USD, however the
government announced in reply that it will not borrow from the IMF or the World
Bank, as the finance minister at the time said: SCAF is worried about piling up
debt.
"We prefer not to borrow
money from abroad. The loans come with strings attached that undermine state
sovereignty," said Mahmoud Nasr, a senior army financial official.
Is this true? Assuming the
sensitivity of SCAF towards undermining state sovereignty or piling up debt,
the intentions of the debtors were not entirely innocent!
KSA promised 4 billion USD of
which only 0.5bn was disbursed ,1bn was deposited in the CBE and 0.5bn was used
to purchase t-bills, Qatar promised 10 billion USD in direct investments but
nothing arrived.
Qatar, Kuwait and KSA were
busy helping the Islamists all along instead, reports surged recently
indicating that the first transfer made from Qatar to “Ansar El Sunna” (which
is not the militia from Iraq, rather an Islamic organization with links to Salafists
political parties in Egypt) was made in
12 of feb.2011 and they kept flowing ever since.
On the other hand, Despite
SCAF’s initial intentions not to borrow from international organizations they
were confronted with the delay in the promised aids, they had to return to the
IMF negotiating a 3.2 Billion USD loan (an amount less than the cash outflow in
December)
Egypt is now caught between the dog and the fireplug,
On one side the IMF is negotiating energy subsidies and tax irregularities and
urges that something needs to be done in the form of a two-year reform
programme. The GCC standing on the other side prefers funding the Islamists and
is waiting for them to succeed SCAF.
The scene changed and power
is shifting to the Islamists who did well in the last parliamentary elections,
The Muslim Brotherhood's party said parliament's majority should form the next
cabinet, perhaps pointing to yet another cabinet in months or even weeks.
Coinciding with these recent statements Qatar announced that it will not invest
the awaited 10 billion USD promised earlier for fear of instability, it will
follow through with its promises however once power is handed to an elected
government.
Now It
is clear that it is a matter of time before PM.El Ganzouri and his cabinet are
out of office and a new one will be taking over, the question of whether it
will be allowing foreign interventions or not is not valid anymore, (the new
comers were, after all funded by those external powers). It is rather a
question of who will be doing the interventions the GCC or the IMF.
My money is on
the GCC.
Hashem Fouad
Cairo, 30-Jan-12
