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Canal revenues rise
Suez Canal revenues hit $504.5 million in August, up from $490 million in July and an approximate 25-percent increase from the $403 million in revenue generated by the canal in August 2007. The number of vessels passing through the canal rose to 1,993 in August 2008, compared to 1,854 in July and 1,755 a year earlier.
The canal is an important source of foreign currency for Egypt, along with tourism and oil and gas. Canal revenues were $5.16 billion in FY 2007-08, according to preliminary data released by Egypt’s central bank last month.
BoP surplus posted
Egypt had a balance of payments (BoP) surplus of $5.42 billion in FY 2007-08, up from $5.28 billion in FY 2006-07, according to preliminary figures released by the Central Bank of Egypt in early September.
Despite the overall increase in the surplus, the size of the current account surplus fell to $888.3 million this fiscal year, from $2.27 billion in FY 2006-07, while the deficit in the balance of goods and services also grew, increasing to $8.45 billion from $4.79 billion. Helping to balance this was an increase in exports from $22.02 billion to $29.36 billion, as well as increases in tourism and Suez Canal revenues.
The capital and financial account grew to $7.14 billion in FY 2007-08, from $853 million the previous fiscal year. This was helped by the increase in foreign direct investment in Egypt to $13.27 billion, from $11.05 billion in FY 2006-07.
Cigarette prices increase
The retail price of eight domestic brands of cigarettes produced by Eastern Tobacco (ET) has been raised by 25 piastres, effective since the beginning of September. Two of the brands, Cleopatra Golden King and Belmont, will increase to LE 2.75, from LE 2.50. Super Star, Cleopatra Box, New Cleopatra Lights, Light, Boston and Capitol will all increase to LE 3.00, from LE 2.75. The additional 25 piastres per pack will be divided between ET, the Tax Authority and retailers. The prices for foreign brands were not affected by this recent decision.
In May, the government increased the price of all cigarettes by between 25 and 50 piastres per pack as part of legislation passed to fund public sector salary increases and other government spending.
Two tourist crashes
A minibus carrying tourists near Dahab in the Sinai peninsula overturned on September 13, killing three Italian tourists and injuring three more. The Egyptian driver and an Egyptian tour guide were also injured.
Two days later, on September 15, while en route from Sharm Al Sheikh to Cairo, a tourist bus collided with a truck near Ras Sidr, killing 12 people and injuring at least 33 others.
According to the Cabinet Information & Decision Support Center, an estimated 32,000 people are injured in traffic-related accidents and more than 7,000 lose their lives on the road in Egypt each year. Egyptian roads are often in poor shape and characterized by speeding and lax traffic law enforcement. A new traffic law aiming to bring order to Egypt’s streets went into effect on August 1.
CBE props up currency
The Central Bank of Egypt (CBE) intervened on September 17 to prevent the depreciation of the Egyptian pound, pumping $500 million into the foreign exchange market. The local currency began sliding against the US dollar in early August as foreign investors sold their stakes in Egyptian securities. The pound had been appreciating against the US dollar since mid-2007. In late October 2007, the CBE purchased an estimated $500 million to prevent the pound from appreciating further. The local currency continued strengthening anyway, going from LE 5.5 to LE 5.3 per dollar in early August, before depreciating back to around LE 5.5 per dollar.
Egypt in top 10 reformers
Egypt was ranked as the number 10 reformer out of the 131 economies that introduced reforms surveyed in “Doing Business 2009,” an annual report issued by the World Bank and the International Finance Corporation. Egypt claimed the number one reformer spot in “Doing Business 2008.”
The report also ranks countries’ economies according to the ease of doing business. In this category, Egypt ranked 114th out of the 181 countries surveyed, compared to 126th out of 181 in last year’s report. To determine the overall rankings for the “Ease of Doing Business” category, the report evaluates countries by looking at 10 different categories, including “Employing Workers” and “Getting Credit.”
Fixed-line auction delayed
The National Telecommunication Regulatory Authority (NTRA) has delayed the auction of a second-fixed line license for a year, citing international market changes in a statement on September 8. “The ICT international markets in Europe and the United States are facing major fluctuations due to the increasing inflation rates and the increasing prices [in these markets],” the NTRA noted, adding that the auction would be delayed until the market is more favorable. The NTRA said it had discussed current market conditions with the 12 companies that purchased the specification handbooks for the bids before choosing to delay the auction.
The latest decision postponed the deadline for bids from September 18, although this is only the most recent of numerous delays. The sale of this license would end Telecom Egypt’s monopoly on fixed-line telephone services, and has been expected since 2005 as a component of Egypt’s commitments to the World Trade Organization to deregulate its telecom sector.
Electricity prices set to change
Electricity prices are poised to increase for the fifth consecutive year starting November 1. The pricing change will not impact the lowest consumption bracket, which is made up of approximately 4 million people. This increase is part of a five-year plan that began in 2004 to raise electricity prices by 5 percent each year, although this year’s increase may exceed that rate. The lowest consumption bracket has been exempted from previous increases as well.
Egypt spent LE 2 billion on energy subsidies in FY 2007-08, and it is anticipated that LE 3 billion will be spent in the current fiscal year. The price charged to energy-intensive industries pay for electricity was raised in July, and is not affected by this decision.
In a related development, the Ministry of Electricity, in cooperation with the World Bank. is reportedly considering changing the electricity tariff rate system to one with higher prices charged for peak consumption hours.
Unemployment drops
Unemployment in Egypt stood at 8.4 percent at the end of June, a drop from 8.9 percent a year earlier, according to a report issued by the Central Authority for Public Mobilization & Statistics (CAPMAS). The number of males and females entering the 24.6 million-strong workforce increased by 4.1 percent and 4.9 percent, respectively. The male unemployment rate is 5.4 percent, while the rate for females is 18.8 percent.
S&P affirms Egypt rating score
Standard & Poor’s rating agency has affirmed Egypt’s “BB+” foreign currency and “BBB-” local currency long-term sovereign credit ratings, and “B” foreign currency and “A-3” local currency short-term ratings, with a “stable” outlook.
S&P analysts acknowledged that inflation and the government budget deficit are problems, but said the ratings were supported by structural reforms under way since mid-2004, and pointed to economic growth of over 7 percent and a strong external position.
School scandal ruling
A court in Minya has incarcerated 14 people for their role in the June scandal surrounding the leaking of thanawiya amma (general secondary school) exams. The scandal broke out when test papers in the subjects of English and mathematics were leaked in the Minya governorate before examinations on June 11 and 12.
Among the convicted was the head of the Minya Examination Committee, who was sentenced to 15 years for his role in the leaks. Another individual was sentenced to 10 years for purchasing and reselling exam papers, and a policeman, a headmaster and two others were each fined LE 7,000 and sentenced to seven years in prison. Among the rest of those convicted, who all received sentences of between three and five years in prison, were parents who had purchased exam papers. Five of the defendants were acquitted.
Egyptian parents spend an estimated LE 14 billion a year on private tutors to help their children score well on the general secondary exams, which are used to determine placement in universities. The public was incensed when reports of the scandal broke out in June and has regarded claims that the leak was confined to Minya skeptically.
Record GDP growth
The gross domestic product (GDP) of Egypt grew 7.2 percent in FY 2007-08, finance minister Youssef Boutros-Ghali said in late August – the highest rate in more than 20 years. GDP growth was 7.1 percent in the previous fiscal year, and stood at only 4.1 percent in FY 2003-04. This increase has been partially driven by the quickest-growing segments of the economy during the last four years: Suez Canal revenues, oil and gas, construction and tourism.
Massive rockslide kills over 100
A deadly rockslide on September 6 crushed at least 35 homes in the Duwayqa area of Manshiyet Nasser, a poor informal settlement at the foot of the Moqattam Hill, killing at least a hundred people. Emergency services are still working to recover the more than 500 additional bodies believed to be buried under the rubble.
The authorities had to bulldoze more homes in order to move heavy machinery to the site of the collapse because of the narrowness of the roads. The government has said it will provide 2,000 apartments for people who were made homeless by the rockslide. But thousands are still living there, beneath the fragile cliff, without the option of moving somewhere else.
Local residents are angry over the government’s response, which they say was too slow and ineffective. The cause of the rockslide was unclear, but people living in the area blame sewage coming from compounds being built on top of the Moqattam plateau.
Chemical makers prepare for EU rules
A workshop was held last month in Cairo for chemical producers to help them comply with new European Union regulations that go into effect on January 1, 2009. Any chemicals exported to Europe must be registered with an EU body in Helsinki, to ensure that they are allowed under a code on chemicals and their usage, called Registration, Evaluation, Authorization and Restriction of Chemical Substances (REACH). The law entered into force in June 2007, with the provisions to be phased in over 11 years.
Egypt’s Chemical & Fertilizers Export Council conducted the workshop. The country exported E570 million worth of chemicals and related products to the EU in 2007.
Pirates release Egyptian crew
Somali pirates hijacked an Egyptian vessel in the Gulf of Aden in early September holding the ship and its 25 crew members for approximately three weeks before releasing them on September 26. Prior to their release, the crew and vessel were being held for ransom in Eyl, a lawless former fishing town in the Somali region of Puntland now used by gangs as a base. As many as 10 other captured vessels are believed to be anchored there.
World Bank lends $145 million
The World Bank has provided a $145 million loan to the Ministry of Irrigation & Water Resources to support an irrigation project in the western Delta areas. The loan will be repaid over 20 years, with a grace period of eight years, according to minister Fayza Aboulnaga.
The project aims at reclaiming 170,000 feddans, including 70,000 in Sadat City and 100,000 along the Natroun-Alamein road.
Rate hikes amid high inflation
The Central Bank of Egypt’s Monetary Policy Committee increased the overnight deposit and lending rates by 50 basis points each to 11.5 percent and 13.5 percent, respectively, during a meeting on September 18. The discount rate was also raised by 50 basis points, up to 11.5 percent. These rate hikes are the sixth time the bank has increased interest rates this year.
A press release by the bank noted that, after considering both domestic and international factors, the hike was “needed to contain inflation expectations.” The annual inflation rate according to the Consumer Price Index, which reflects urban inflation, stood at 23.6 percent in August, a 16-year high. However, the pace of food-price inflation decelerated to 1.68 percent for the period of June through August, from 3.88 percent in the period between January and May.
Egyptian migrants missing at sea
A boat carrying 83 illegal Egyptian migrants heading to Europe went missing September 21 off the coast of Greece. The boat had left Damietta three days earlier. Egyptian officials said they were coordinating with Greek rescue authorities to locate the vessel. There were no further reports on the boat’s location.
In October 2007, at least 21 Egyptians drowned in two incidents off the Italian coast. The government has warned people not to try these journeys, which are dangerous and often made on boats that aren’t seaworthy.
Gov’t exiting fertilizer distribution
The state-owned Principal Bank for Development & Agricultural Credit (PBDAC) will stop distributing fertilizer over the next two years, said its chairman Ali Shaker in mid-September. PBDAC is the only distributor of subsidized fertilizer in Egypt.
Amin Abaza, the minister of agriculture, was quoted in August saying that the government is planning to remove fertilizer subsidies over two years as part of its effort to liberalize the fertilizer sector. On March 2, the Ministry of Trade & Industry (MTI) announced a 90-percent increase in the price of azotic (nitrogen-based) fertilizer, bringing the official domestic market price to LE 1,500 per ton. Prices are expected to rise to LE 2,100 per ton this month, the chairman of the General Fertilizers Department at the Federation of Egyptian Chambers of Commerce reportedly said in September. This hike is a response to the increased cost of raw materials and natural gas. The price of natural gas for fertilizer production, as well as for all other energy-intensive industries, was raised by the government in July to $3 per million btus.
Desert kidnapping
Masked gunmen seized 11 European tourists on a desert safari in southwestern Egypt on September 19, along with the Egyptian owner and seven other employees of the tour company that was operating the trip. The abduction occurred while the group was en route through the Western Desert to Al Gilf Al Kebir, a picturesque plateau near the Sudanese and Libyan borders with Egypt where there are many caves, such as the famed Cave of the Swimmers, containing prehistoric paintings. The five Germans, five Italians, one Romanian and eight Egyptians were still being held as of press time.
The kidnappers have reportedly asked for up to $15 million in ransom, although the exact amount is unclear. The nationality of the kidnappers is also unknown, with Sudanese and Egyptian sources making contradictory statements. The tourism ministry has said in a statement that the abduction was “an act of banditry not of terrorism.”
MTI loosens rules on steel imports
The Ministry of Trade & Industry (MTI) has changed regulations to allow for the import of steel that complies with ISO 6935 or Gulf Cooperation Council standards in an attempt to put downward pressure on local steel prices. Previously, steel imports weren’t banned, but had to adhere to Egyptian standards. In practice, high shipping costs make Egypt an impractical export market for finished steel products. Some analysts, therefore, believe that the decision will have little impact.
After soaring for the first eight months of this year, steel prices retreated recently. Steel rebar prices hit a high of LE 7,750 a ton in August, fueled by construction demand, but fell to between LE 6,150 and LE 6,300 a ton in early September.
IMF chief urges continued reform
Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), said on September 15 that Egypt should continue along the path of economic reform that began four years ago. “The reform program has not only boosted domestic investor confidence but also made Egypt a choice investment destination for regional and other international investors,” he said in a press statement.
While these reforms have been successful, Strauss-Kahn acknowledged that challenges remain, refering to high inflation and the rising cost of subsidies. “Going forward, curbing the rise in subsidies, particularly through a better targeting toward the poor, will be essential,” he added.
Strauss-Kahn was on his first official visit to Cairo as head of the IMF.
Corruption ranking released
Egypt tied with four other countries for 115th place out of the 180 countries included in the “2008 Corruption Perceptions Index,” an annual study conducted by Transparency International that “ranks countries in terms of the degree to which corruption is perceived to exist among public officials and politicians.” Egypt’s 2008 CPI score was 2.8 out of 10, compared to 2.9 last year. Scores under five indicate “a serious corruption problem.” In this year’s report, Egypt was 13th out of the 18 countries included in the Middle East and North Africa regional rankings.
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