Oct. 12 (Bloomberg) -- Egypt’s finance minister submitted his resignation two days after deadly clashes between Coptic Christians and security forces in Cairo, prompting further concerns over the effects of political unrest on the economy.
Field Marshal Mohammed Hussein Tantawi, leader of the military council that took power after the popular revolt that ousted President Hosni Mubarak, “rejected” the resignation, the state-run Middle East News Agency said late yesterday, without giving further details. Earlier, MENA cited Prime Minister Essam Sharaf as saying the Cabinet “puts its resignation at the disposal” of the council, adding that this was “standard procedure and doesn’t mean” that the government had quit.
The departure of Hazem El Beblawi, who was in talks with Saudi Arabia and the United Arab Emirates for $5 billion in loans, would “disrupt and delay the ongoing effort to bring any forthcoming financial support from the neighboring countries and discussions with the IMF and the World Bank,” said Alia Moubayed, London-based senior economist at Barclays Capital.
El Beblawi, who is also deputy premier, said he was resigning due to a “severe breach of the security and safety of society” after the violence on Oct. 9 that left at least 25 people dead, according to MENA. He would be the second finance minister to leave office since Mubarak’s departure, during a period of unrest and labor strikes. Gross domestic product contracted 4.2 percent in the first quarter and rose 0.4 percent in the following three months, according to official data.
The day after the clashes, on Oct. 10, the country’s benchmark stock index, the EGX 30, declined 2.3 percent to the lowest level since March 2009.
The government’s borrowing costs have soared to the highest level since 2008 after foreign investors slashed their holdings of treasury bills, leaving domestic banks to buy the debt. Egypt’s 5.75 percent dollar bond due in April 2020 fell after yesterday’s announcements, sending the yield up 6 basis points to 6.02 percent according to data compiled by Bloomberg.
“This resignation embarrasses the military council,” said Samer Soliman, an assistant professor of political economy at the American University in Cairo, referring to El Beblawi. “The military council has reached a very grave stage in running this country.”
El Beblawi said last month he had “no inhibitions” about proposals by the International Monetary Fund to support the country. Egypt turned down a $3 billion loan offer from the fund in June. He didn’t answer repeated calls to his cell phone seeking comment yesterday.
“Any delay or disruption in bringing financial support to Egypt will undermine the sentiment of investors, both domestic and international, and will put additional pressure on the currency,” said Moubayed.
Egypt’s foreign reserves fell for the ninth straight month this year to $24 billion in September.
Sectarian tensions have increased amid fears by many Christians that Islamists will have more influence in post-Mubarak Egypt, where parliamentary elections are scheduled to start on Nov. 28. The fighting erupted while Christians were protesting an attack on a church in southern Egypt.
The Oct. 9 demonstrations started peacefully and then turned violent when protesters were attacked by men in civilian clothing who pelted them with stones, witnesses said. They later clashed with security forces and some were killed and injured by gunfire. Others were run over by an armored vehicle, they said.
Call For Protection
The Free Egyptians party co-founded by Christian businessman Naguib Sawiris said in an e-mailed statement that it “warns the military council that continuing to handle events with force will shake the trust that Egyptians have given it.” It called on the army to “shoulder its responsibility to protect Christian establishments” and called the violence “a clear attack on the freedom to peacefully protest.”
“The gap between the revolutionaries and SCAF has been widening,” Hani Sabra, an analyst at Eurasia Group said, referring to the Supreme Council of the Armed Forces, the official name of the military council. “But not everyone hates SCAF. SCAF does enjoy some support as guarantors of stability.” The prime minister’s “popularity with young revolutionary activists has plummeted. They view him as more of an enabler of the military council.”
Egypt’s ruling military council ordered the Cabinet to form a fact-finding committee to investigate the Oct. 9 violence. Military prosecutors ordered the detention for 15 days of 28 Muslims and Christians in relation to the clashes pending investigations, MENA said today.