Home Today's Paper Most Popular Video Gallery Photo Gallery
Subscription Blog Signin Register
Logo
Friday, August 14, 2020 08:06:52 AM
Follow Us On: Facebook Twitter Twitter Twitter Twitter

Economic pitfalls risk cooling Egypt's hot money inflows

photo by

A member of a medical team is seen beside a banner for Egyptian President Abdel Fattah el-Sisi, as he sprays disinfectant as a precautionary move amid concerns over the coronavirus disease outbreak in Cairo. Internet

By
28th-Jul-2020       
Share
  • Twitter
  • Google+
  • Save
  • E-mail
  • Print
Comments
Share your thought
Post a comment »
Read all () »

Reuters :

The threat of conflict in Libya, water security worries and a flatlining tourist sector risk upending a nascent rally in Egyptian bonds, bankers and economists say.
The North African country has attracted a wave of foreign investor interest in the past three months, emboldened by fresh financing from the International Monetary Fund (IMF), and short-term local debt offering yields of around 13%, among the highest in emerging markets.
Bankers and economists warn, however, that the yield bonanza masks an economy with weak prospects and heightened political risk, with the Cairo bourse falling on several days this month on fears of a Libya intervention. Parliament gave President Abdel-Fattah al-Sisi last week the green light for possible military intervention in Libya.
A deployment of armed forces into Libya could lead to higher military spending at a time when COVID-19 is already hitting the budget deficit.
"Obviously the IMF support package has reassured foreign investors and that is why there has been an improvement in flows, but the fundamentals are still weak," said Zeina Rizk, executive fixed income director at Arqaam Capital.
"The virus is raging, tourism is down, and government spending - needed to boost the economy - will add further leverage," she added.
Adding further uncertainty, Egypt has failed so far to reach a deal with Ethiopia to regulate flows from its Grand Renaissance Dam (GERD) which threatens its main water source.
"The political risk has deteriorated," said Hasnain Malik, head of equity research at Tellimer Research.
The tourism industry, meanwhile, which makes up as much as 15% of GDP, is unlikely to recover soon, analysts said. Egypt, unlike Tunisia and Morocco, has not been added to the European Union's list of safe COVID-19 countries.
Egypt's reported COVID-19 cases have been falling in the past weeks but the number of new infections remains too high for now to lift the travel warning, diplomats said.
Tourist flights to Red Sea resorts have been rising since airports reopened on July 1, but normal occupancy rates would be only back by March or April next year, said Alaa Akel, head of the Egyptian Hotels Association Red Sea.
More than half of the hotels are back in business after two months of lockdown and those still closed will probably re-open by November, he added.
The central bank and state press centre did not respond to questions sent by Reuters.
The government expected growth of 3.5% in the fiscal year 2020/21, which began in July, but growth could slow to 2% if the coronavirus crisis continues until year-end, Planning Minister Hala al-Saeed said in May.

Sisi in March approved a 100 billion pound ($6 billion) plan to stem the economic fallout, including support for the tourism sector, payments of salaries for staff sent home by their employers and cash for informal workers.
With foreign reserves standing at $38 billion, Egypt's finances are in much better shape than in 2011 after the toppling of Hosni Mubarak.
This is down from $45 billion from before the pandemic, but the central bank has been able to support the currency, which strengthened in July after a dip the month before, a gain that helped buyers of short-term debt make a profit, bankers say.
"We have been seeing significant flows back into Egypt," said Farouk Soussa, senior Middle East and North Africa economist at Goldman Sachs.
"The inflows have indeed been at the short end of the curve, reflecting higher short term yields and the potential for near-term strengthening in the pound, which make the carry trade the most lucrative in Egypt at the moment," said Soussa.
He was referring to a strategy which involves investors borrowing in currencies where interest rates are low to invest in countries where yields are high.
Egypt's international bonds have performed better than some other similarly rated emerging market sovereigns, such as El Salvador and Sri Lanka, since the March sell-off.
Egypt's 2025, 2027 and 2040 issues are trading around 12% or less from pre-pandemic highs, Refinitiv data shows.
But analysts say the inflow of "hot money"-or investments made for short periods-does not translate into new jobs in the real economy and might disappear if the currency slips.
Barring its energy sector, Egypt had been struggling to attract foreign direct investment (FDI), a predicament blamed by analysts on bureaucracy and an expansion of army-owned firms in sectors from food production to cement.
"Increasing long term foreign direct investment further will require improvement in Doing Business indicators, maintaining a sound, predictable macroeconomic framework and political stability," Raza Agha, head of emerging markets credit strategy, Legal & General Investment Management.

Tariff
Add Rate

News Archive

Inside The New Nation

Editorial »

Cash incentive programme fails to reap benefits for ultra-poor


THE Parliamentary Standing Committee on Disaster Management and Relief Ministry expressed concern over the government's cash incentive programme for the rural extreme poor on Wednesday. Following the ninth meeting of the committee on Wednesday, the Chairman of the Standing Committee stated that the poor people were not benefited by the ...

City »

Outgoing Indian High Commissioner to Bangladesh Riva Ganguli Das calls on State Minister for Shipping Khalid Mahmud Chowdhury at his office of the Ministry on Thursday.


.

International »

Lebanese MPs meet for first time since blast, US envoy due in Beirut


Reuters :Lebanese security forces deployed heavily in Beirut on Thursday, stopping protesters from reaching a conference centre where MPs began meeting for the first time since the catastrophic chemicals explosion last week that killed 172 people.Senior US official David Hale is expected in Beirut later on Thursday to stress the ...

Editorial »

Stealing money in chaos is easy but investment needs competent government


MEDIA report in a national daily on Wednesday said Bangladesh Bank's special fund for capital market investment is facing setback because of lukewarm response from banks which were to make the fund available from their money for funding the ailing bourse. The five year special fund of Tk 100 billion ...

City »

Bangladesh United Communist League forms a human chain in front of the Jatiya Press Club on Wednesday to realize its various demands including trial of corrupt people of the Health Sector.


.

Football »

Shakhtar, Sevilla advance into UEFA Europa League semifinal


Agency :Shakhtar Donetsk crushed hapless FC Basel 4-1 following a one-sided affair while Sevilla's Lucas Ocampos left it late to eliminate Wolverhampton Wanderers 1-0 in the UEFA Europa League quarterfinal on Tuesday.Donetsk needed no warmup time and broke the deadlock with just two minutes played as Marlos's corner kick allowed ...

Business & Economy »

Trump candidate for Inter-America bank accuses Argentina of 'obstruction'


AFP, Washington :US President Donald Trump's candidate to head the Inter-American Development Bank said Tuesday he has the backing of the majority of Latin American countries but accused Argentina of trying to "obstruct" his election, with the help of Mexico, Chile and Costa Rica.Mauricio Claver-Carone told a news conference that ...

Editorial »

Mere warning will not do if the corrupt ones remain unabated


MEDIA report said that the government has taken a move to rein in the soaring cost of development projects and the Planning Minister is going to hold a meeting with Secretaries of the Development Ministries and Planning Commission officials to find out ways how to plug corruption and misuse of ...

City »

Devotees of the Hindu community offer prayers on the occasion of Janmashtami. The snap was taken from the city's Swamibag Mandir on Tuesday.


International »

China accused of seeking to turn Taiwan into `the next Hong Kong`


Al Jazeera News :Taiwan faces an increasingly difficult position as China pressures the democratic island to accept conditions that would turn it into the next Hong Kong, its top diplomat told visiting US Health Secretary Alex Azar on Tuesday.Azar arrived in Taiwan on Sunday as the highest-level US official to ...

International »

Turkey says it will license new Mediterranean areas this month


Reuters, Nkara : Turkey will issue seismic exploration and drilling licenses in new areas of the eastern Mediterranean by the end of August and continue its operations in the region, Foreign Minister Mevlut Cavusoglu said on Tuesday, amid tensions with Greece.NATO allies Turkey and Greece are at odds over overlapping claims ...

Business & Economy »

India-Bangladesh ties, connectivity create new trade opportunities: Riva


Indian High Commissioner here Riva Ganguly Das on Tuesday said excellent India-Bangladesh bilateral relations and recent connectivity initiatives in railways and inland waterways created new business opportunities as these reduced trade cost between the two neighbouring countries."With resilient economies and robust business environment, both the countries will not only be ...

Business & Economy »

Emirates launches special portal for trade partners


Business Desk :Emirates has rolled out a brand new, state-of-the-art online gateway to serve its travel trade partners around the world.Tailored for each market, and personalised for each partner to cater to their unique business environment and needs, the Emirates Partners Portal is a one-stop shop for travel industry partners ...

Football »

Dortmund flexing their muscles, Sancho must stay


Borussia Dortmund are flexing their muscles in their efforts to keep England forward Jadon Sancho at the club.In the club's pre-season training-camp in Bad Ragaz, Switzerland, the 2012 German Champions sporting director Michael Zorc announced the surprising news."We plan on having Jadon Sancho in our team this season," Zorc commented. ...

Football »

Ronaldinho set for August 24 release


AFP, Asuncion :Brazil great Ronaldinho could be freed on August 24 following five months detention in Paraguay over a forged passport, judicial sources told AFP on Monday.The former Barcelona, AC Milan and Paris Saint-Germain star was detained alongside his brother Roberto de Assis Moreira on March 6, accused of entering ...

 
Items that you save may be read at any time on your computer, iPad, iPhone or Android devices.
 
Are you new to our website? Do you have already an account at our website?
Create An Account Log in here
Email this news to a friend or like someone
Email:
Write a comment to this news