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Egypt Bankruptcy, Soon?

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  • Egypt Bankruptcy, Soon?

    I know everyone is focused on other things but being curious what is happening behind the scenes I searched a bit how things are in a country where functionality was more or less was impaired in the past two years or so and the reserves have been running down.
    URL="http://www.bloomberg.com/news/2013-03-21/moody-s-pushes-egypt-rating-lower-into-junk-on-political-divide.html"]http://www.bloomberg.com/news/2013-03-21/moody-s-pushes-egypt-rating-lower-into-junk-on-political-divide.html[/URL]

    Egypt has been in loan talks with the International Monetary Fund for more than two years and its foreign reserves have plunged more than 60 percent since the 2011 uprising. The government is “exerting the utmost effort” to complete a $4.8 billion IMF agreement by the start of next fiscal year in July, Planning and International Cooperation Minister Ashraf el-Arabi said yesterday.
    Egypt’s rating “indicates that the probability of default has risen materially but that the risk of default is not necessarily imminent,” Moody’s Byrne wrote in the report. At Caa1, the average cumulative default rate over one-year is close to 10 percent and slightly under 40 percent over five-years, he added.
    Tourism is basically dead it used to provide about 11% of GDP most likely far more. Egypt tourism faces blow, may only be short-term | Reuters

    Egypt's economy is still a mess | GlobalPost
    Originally from Sochi, Russia.

  • #2
    Still very unlikely. They have a lot of people willing to prop them up for the near term.

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    • #3
      Bread riots or bankruptcy: Egypt faces stark economic choices | StratRisks
      Bread riots or bankruptcy: Egypt faces stark economic choices - CSMonitor.com

      After Egypt supported the US-led coalition to drive Iraqi troops out of Kuwait, Mubarak was rewarded with at least $15 billion in international debt forgiveness.

      But Morsi is neither Sadat nor Mubarak, and Egypt is in far more chaos than it was at any other moment in recent decades. The US doesn’t see his Muslim Brotherhood as a reliable partner, and members of Congress are likely to keep loans and aid at a trickle. The IMF has balked at coughing up money without concrete, short-term change in how the government spends that money.

      The country’s coffers are draining fast. The exchange rate was at 5.8 pounds to the dollar at the end of 2010, shortly before the massive street protests began that drove Mubarak from power. Today, it is trading close to 6.8 to the dollar, a 17 percent drop, most of which has come since the start of the year.
      Two thing Egypt does that is totally unsustainable subsidize fuel and bread. Both are billion dollar safety measures.

      The pressure on the pound and total subsidy spending of about $20 billion a year has put the central bank in dire straits. Foreign reserves that stood at $35 billion in January 2011 are now hovering close to $13 billion.
      Notice the drain, 20 billion a year!!! we are getting to the point where an increase $50 a ton in wheat costs implies a very very real time contraction.
      That’s why the IMF money, about $4.8 billion in all, is so crucial. While the IMF’s cash by itself wouldn’t make Egypt’s problems go away, it would signal other governments and subsidized lenders to dip into their pockets as well.
      My guess Suez brought in 5-7+ and tourism the other 10+ for the balance of forex to be more or less in equilibrium. Tourism is gone, Suez traffic is down I guess (Suez Canal January Traffic Details: Net Tonnage - Bloomberg)
      Yep, they are done.

      You also have to bear in mind that any ships that go through the northern passage to China or Asia are saving money and not going through Suez. My guess summer months traffic falls off as the Northern passage opens up.

      IMF official in Egypt as currency crisis bites
      This is probably a lie my guess they spent the money on necessities but if it isn't they are not very bright...
      Having spent more than $20 billion defending the pound since Mubarak's fall, the central bank introduced the new system for auctioning foreign currency to preserve what it described as critically low foreign currency reserves.

      The central bank said on Sunday its foreign reserves had inched down $21 million in December to $15.015 billion. Economists had expected a steeper fall.
      Reserves fell about 2 billion or so over last 3 months. Fuel use goes up during summer so we shall see if it accelerates.
      EGP to USD Conversion Chart - Bloomberg
      I guess it goes to 7 to the dollar soon.
      Originally from Sochi, Russia.

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      • #4
        Asia Times Online :: Middle East News, Iraq, Iran current affairs


        SPENGLER
        When hunger came to Egypt
        By Spengler

        Egyptians are getting hungry. The fall of the Egyptian pound to just 60% of its 2012 exchange rate against the dollar has priced everything but bread out of the reach of the poorer half of the population, and the bread supply is now at risk.

        The news late last week that Libya and Qatar may lend US$5 billion to Egypt was overshadowed by reports that Cairo owes $5 billion to the oil companies that produce oil and gas on its territory. Half of the amount is overdue, and oil companies reportedly expect to wait years for payment. Egypt's arrears on


        trade credits from suppliers of oil, wheat, and other essential items probably exceed its $8.8 billion cash reserves, leaving the country flat broke.

        With a trade deficit running at $32 billion, the Libyan and Qatari money covers just a couple of months; stiffing the oil companies might have covered the past couple of months. If the Egyptian government finally comes to terms with the International Monetary Fund for a $4.8 billion loan, that will cover another few weeks.
        Any thoughts what happens after Bankruptcy? my feeling there is a real Civil War in Egypt.
        Originally from Sochi, Russia.

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        • #5
          Originally posted by cyppok View Post
          Asia Times Online :: Middle East News, Iraq, Iran current affairs




          Any thoughts what happens after Bankruptcy? my feeling there is a real Civil War in Egypt.
          That's Spengler. You might as well cite the LaRouche people.

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          • #6
            I don't see how you escape those fundamentals...

            Comment


            • #7
              Originally posted by snapper View Post
              I don't see how you escape those fundamentals...
              It's a matter of source citation.

              Quoting "Spengler" is like quoting Mike Sparks, even if he's talking about say, the possibility of the GCV being overweight. Sure, it's likely, but I'd like to hear it from someone who isn't huffing the crazy glue while riding the midnight express train to conspiracy central.

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