The emperor has no clothes, and the empire has no tailors. From the English-language edition of Almasry Alroum:
Egypt might face bankruptcy within six months, Egyptian reform advocate and presidential hopeful Mohamed ElBaradei warned on Monday.
During a meeting with labor leaders at the Center for Trade Unions and Workers Services (CTUWS) in Helwan, south of Cairo, ElBaradei attacked the “failing” policies of Egypt’s ruling military council.
He criticized the Supreme Council of the Armed Forces (SCAF) for what he called incompetence and lack of experience, saying that experienced government officials don’t have enough power.
Egypt is currently relying on its cash reserve with no gross domestic product, he said.
In September, the Central Bank of Egypt (CBE) said foreign reserves dropped US$697 million in August, a continuation of an eight-month downturn, standing at US$25.008 billion at the end of August.
Observers blame the drop in cash reserve on the intensive exit of foreign capital during the January revolution. Experts also blame the halt in Egypt’s sources of foreign currency, such as tourism and exports.
As I’ve been warning all year on this blog and elsewhere, “national bankruptcy” for Egypt is not the same thing as the bankruptcy now under negotiation for its neighbors on the northern coast of the Mediterranean. The largest Arab country imports half its caloric consumption and at least 15 million Egyptians depend on government rations for daily survival. Half of Egyptians. Roughly half of Egyptians live on less than $2 a day, but a small (pita-sized) loaf of subsidized bread sells for less than 1 cent US. There are spot shortages, but Egyptians are not starving–yet. If the country runs out of money, it also runs out of food.
Egypt’s financing requirement annually is somewhere between $15 and $20 billion a year; the Gulf States and the IMF might be good for a third of that. Of course, Egypt could postpone actual starvation, for example, by cutting its military budget massively and diverting funds to food. I suspect that something like that may be happening already.
When he headed the International Atomic Energy Agency, ElBaradei apologized for Iran’s nuclear ambitions, and the Bush administration tried to blackball him. He is no friend of the West. But he’s the only politician in the Egyptian presidential race who has spent his career away from the inbred, paranoid fantasy world of internal Egyptian politics. As a political outsider with no natural constituency, he was for a while a favorite of the liberal punditeska, popping up in Tom Friedman columns at the start of the Egyptian rebellion. He has very little chance of election. As an outsider, he might as well state the obvious.
So much for the Arab Spring.
UPDATE, October 5, from the Financial Times:
The last report we had put reserves at $25 billion. Now they are down to $19.4 billion.
Egypt has lost a third of its foreign currency reserves since the beginning of the year as a result of the turmoil accompanying the revolution, which swept Hosni Mubarak, former president. out of power.
Foreign currency reserves fell from $29.8bn in February to $19.4 at the end of September, according to figures published by the Central Bank of Egypt. The current reserves are estimated to cover 4.8 months of imports, down from 6.9 in April 2011.
Reserves declined by $1bn in September, probably the result of foreign investors dumping Egyptian debt because of worries over the widening deficit and the country’s faltering political transition, according to Beltone Financial, the Cairo-based investment bank. “It is very likely that foreigners could have decreased their holdings further in September 2011, on worries over the Egyptian government’s ability to finance its deficit and on latest disagreements between the military council and political parties,” said the bank in a report on Wednesday.
There’s something wrong with that last sentence: The central bank reported $25 billion of reserves in August, so the decline is closer to $6 billion. Perhaps this has something to do with it: “Only $500m of some $7bn of promised aid from Saudi Arabia and the United Arab Emirates have arrived so far,” the FT writes. I suspected that Egypt counted loans as reserves. Perhaps these have now been un-counted. That is particularly worrying, because the Gulf States are likeliest source of emergency aid for Egypt. The country’s financing requirement appears to be somewhere between $10 and $20 billion a year, closer to the upper end of the range.
It astonishes me that this impending disaster has gotten to little coverage in a global media that hailed the Arab Spring as the best thing since the fall of Communism.