Today there was a frenzy in Cairo when rumors spread in the afternoon like fire that there were no foreign currency in banks and Foreign exchange companies. There was even that rumor about Western Union closing its offices in Egypt because it lacks US dollars.
Well Western Union offices are not going to suspend the work in Egypt and they are working fine but.. there is a foreign currency shortage at least in Cairo these days. The foreign exchange companies got no US dollars or Euros thanks to the huge demand on foreign currency “Euro and US dollars” early this week. What happened early this week !??
Well Egyptians freaked out when they heard the contradicting news/rumors about the resignation of the Central Bank of Egypt’s governor Farouk El Okdah
According to my sources Farouk El Okdah wants to jump the ship soon before Titanic would hit the iceberg soon but for some reason he can not jump now.
I will not go in economic debates because I am not an economic expert but We all know that Egypt is heading towards a terrible economic crisis that some compared to the Greek crisis.
Now socially there is a hysteria in the Upper , Upper middle and middle classes. People are calling each other advising them to withdraw their bank accounts and buy either gold or real estate. Some advised their friend to convert their Egyptian pounds to US dollars and Euro before the pound hits rock bottom. I am speaking about my friends , their families and their neighbors.
Ironically withdrawing their money from banks will harm the Egyptian economy for real. This has to stop. Rumors and wrong actions will make things even worse.
Z; Egypt with its far beoynd rich history and geography can easily be a rich country from tourism alone. The best template they can follow is Spain, where on the average 100 millions tourists cross the country per year. It requires though to maintain open social environment NOT LIKE VEGAS , but open enough like egypt of the fifties. Unfortunately, the MBs and Salafis are the worst enemies for this kind of model. Sadely enough the Salafis can blind themselves as it pleases the American , see what Dubai and Abu Dahbi is doing now with biggest lie!!! Are they applying the Saudi rules for women not to walk alone, not to drive, and to wear higab (over thousand dollars of cosmetics on their face) as symbol of "modesty" !!!!!!. EGYPT, 'WAKE UP'.. I can't say it any louder.
ReplyDeleteAnother source of dollars for Egypt used to be the export of natural gas to its neighbors. Egypt terminated that as well.
DeleteCorrect; providing (hopefully)progressing Egypt will not need the natural gas to generate electric power. The best alternative is nuclear power like their wonderfull neighbour UAE building 4 Nuclear reactor after selling all their oil!!! All these scenarios are for "Awake Egypt"...
DeleteReal economic troubles didn't happen yet, this is just a teaser. The crisis will start when Egypt will need to spend huge portion of national revenues to finance loans. Productivity is already at rock bottom. The S&P published today a lower confidence in Egypt economy; this will result in tougher austerity measures imposed by the lenders.
ReplyDeletePredicting these economic challenges, it was unwise to polarize the nation in the battle of constitution. Morsi is a dreamer if he thought he can sail this economic storm while 1/3 of energetic population is alienated and resentful. The political side of the national crisis will impact the economic crisis. The snowball effect is unpredictable. Argentina is not a strange example to consider.
The shortage in foreign currency is real. US dollar could be a safe harbor in this crisis. Euro zone is a bit strained, and speculators will raise the price of gold. Real Estate is a risky business tied to the ground, and can’t be cashed in view of long-term shortage of money supply.
@Z
ReplyDeleteWhat you are experiencing is a glimpse of things to come. The Egyptian economy is in terrible shape, it has enough reserves to sustain it for three months, Standard and Poors has downgraded Egypt for the forth time this year, the IMF and other foreign investors will not provide Egypt with the badly needed loan unless there is proof of political stability & financial responsibility.
Against this background there are strong indications that the Egyptian pound will depreciate by 20% to make Egypt more competitive.
Please look-up what international money investment houses are forecasting about Egypt's economy...it is very bad!
The only way to avoid an economic disaster is:
1. The government has to create political stability by responding to 100% of Egyptians political needs and not the 64% of 31% who voted 'YES'.
2. Adopt sound economic fundamentals by removing government supported subsidies.
3.Fight corruption.
Best option for Egypt is to default on foreign debt and stop making payments. Very painful in the short run but look at Iceland today and Argentina in 2004. After the painful period there is rapid economic growth.
ReplyDeleteIronically, interest rates start to come down because new creditors don't have to worry about older ones.
Actually this is a blessing. I still believe that what most Egyptians want is bread rather than democracy or religion. When the economy crashes - and it will - the religious zealots will be blamed and purged from our society once and for all. Only then will we be able to rebuild a new and free Egypt
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