Breakfast Wrap: Lights Out for Egypt? A Show for the IMF, Qatar Defence Plans

If the latest comments from the government can be believed, the decision to enforce a 10pm curfew today for shops and restaurants will be postponed “indefinitely”, local development minister Ahmed Zaki Abdeen told Al Masry Al Youm.

Read this as: “We have realised that this move, meant more as a symbolic gesture to save energy and appear proactive, will actually be more detrimental than helpful for the domestic economy, and we have decided to abandon these plans for now.”

Aside from creating another situation where a lack of clarity is unnerving for the business community, whatever the government does now is likely to be criticised.  They either back-track from an original decision, making the president and his ministers look weak, or they stick to the plan which will cost the economy billions of dollars.

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On the bright side negotiations over a loan with the International Monetary Fund has pushed the Egyptian pound to a near 8-year low, Reuters reports.

Now is the time to swap all your pounds for US dollars! Personally I hold my cash in Sterling, the strongest currency in the world (Disclaimer: this is not investment advice, and I am not an investment advisor, but I am British and I have a strong alliance to the Great British Pound.)

Traders said that by letting the pound slip, the government seemed to be signalling to the IMF it is prepared to be flexible over the value of the currency, which many analysts say is substantially overvalued against the dollar, the Reuters report said.

This may be a comfort to the IMF delegation in Cairo, but it’s only the tip of the iceberg.  Some evidence must be offered to the IMF to show the government is full-steam ahead with energy subsidy reform, the biggest drain on the country’s finances and one of the reasons why foreign reserves have been down (i.e. to fund petroleum imports).

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Citadel Capital, an Egyptian private equity outfit, are slowly moving in to fill the gap that is forecast once the country’s subsidies package diminishes. 

The company’s $3.7 billion investment in the Egyptian Refinery Company was one way of doing this (refine at home rather than import more expensive already refined fuel).

Another is through investing $200 million on barges, ports and storage facilities that are already handling shipments of wheat, cement and phosphate, Bloomberg reports.

Why? Because as the subsidy reform hits Egypt’s transport system and cheap fuel is a thing of the past, trucks and railroads will cost more to run, tipping the scale towards cheaper modes of transport like barges.   

Within five years, the share of cargo moved by river may jump to at least 15%, [from just 0.5%] said Stephen Murphy, a managing director at the company.

Savvy, those Citadel Capital guys.

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Another group of shrewd, albeit indulgent, investors are the Qataris.

This FT piece on the reasons behind Qatar’s decision to create a 50 million Euro fund to invest in some of Paris’s poorest suburbs shines some light on the investment strategy behind the Gulf state.

The French political right and left united in disapproval.

Yet the reaction shows a fundamental misunderstanding of the way Qatar operates globally and what it is trying to achieve. The pattern of its international relations shows its investments are geared primarily to three things: profit, security and building a brand that appeals to its western allies despite not being a democracy.

It’s not until you get to the end of the piece that you realise why it’s singing the praises of Doha.

The author is deputy director for the Royal United Services Institute (Qatar), and would probably get fired if he wrote anything else. But still, interesting read in Qatar’s defence plans.

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