Egyptian Economy Falters as Clashes in the Capital Leave 11 People Dead
Clashes between Egyptian protesters and the army threatened to further undermine the ailing economy, as the benchmark index slumped the most in almost a month and the country missed its target on the sale of Treasury bills.
Soldiers and security forces fought with demonstrators in Cairo for a fourth day today. At least 11 people have been killed in the latest bout of violence, which began Dec. 16 as the army tried to disperse protesters who were demanding that the ruling generals hand over power. About 500 people were injured in the clashes, Health Minister Fouad el-Nawawy said. In the North Sinai, the pipeline that exports Egyptian natural gas to Jordan and Israel was attacked for the 10th time this year.
If the unrest continues, it will “increase pressure on vital economic indicators such as currency reserves, foreign direct investment and tourism,” said Wael Ziada, Cairo-based head of research at EFG-Hermes Holding SAE. “The longer such a situation persists, the longer is the recovery.”
The government will discuss austerity measures to reduce record borrowing costs, the state-run Middle East News Agency said Dec. 16. The economy expanded at an annual rate of 1.8 percent in the fiscal year through June, compared with 5.1 percent in the previous 12 months, according to government figures. Quarterly growth for the three months through September was 0.4 percent, according to a Cabinet briefing document shown to Bloomberg News last week.
Deficit to Widen
The budget deficit may reach 10 percent of gross domestic product in the fiscal year through June, 1.4 percentage points higher than the previous forecast, Planning Minister Fayza Aboulnaga told reporters last week.
The demonstrators are demanding that soldiers hand authority immediately to civilians, that army-appointed Prime Minister Kamal el-Ganzouri resign and that the trials of former regime officials over the killing of protesters be expedited. The military, which took power after the removal of Hosni Mubarak from the presidency in February, has said it won’t relinquish control until there is an elected president and a new constitution.
“I am deeply concerned about the continuing reports of violence in Egypt,” U.S. Secretary of State Hillary Clinton said in an e-mailed statement. “I urge Egyptian security forces to respect and protect the universal rights of all Egyptians, including the rights to peaceful free expression and assembly.”
Votes for Islamists
Egypt is in the middle of parliamentary elections that have shown strong support for Islamist groups. Turnout in the second phase of the vote was about 67 percent, the head of the electoral commission, Abdel Moez Ibrahim, said late yesterday on state television. The Freedom and Justice Party, an affiliate of the Muslim Brotherhood movement, won more than 39 percent of the party-lists votes, the largest share in the second round, the state-run Al Ahram newspaper reported.
Due to the complexity of the electoral system, which requires voters to cast ballots for individuals as well as party slates, the makeup of parliament won’t be known until after final results are announced in mid-January, nor will it be clear until then where the balance of power lies among the assembly, the army and the Cabinet.
El-Ganzouri said at a press conference yesterday that troops didn’t shoot at protesters and that the deaths by live rounds were caused by attackers, the Associated Press reported. The military council said on its Facebook page that groups that gathered near government buildings were implementing “a plot against Egypt.”
Unidentified attackers planted two explosive devices beneath a gas-export pipeline near the city of El Arish as it was being repaired following a similar attack last month, the Oil Ministry said in a faxed statement yesterday. There were no casualties, it said.
The EGX 30 Index dropped 3.5 percent, the most since Nov. 22, to 3,782.74 at the 2:30 p.m. close in Cairo yesterday, extending its slump this year to 47 percent.
The Finance Ministry raised 2.3 billion pounds ($382 million) in 273-day securities yesterday, compared with the 3.5 billion pounds it was seeking, according to data on Bloomberg. The average yield rose seven basis points, or 0.07 of a percentage point, to 15.209 percent.
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