The most important news to come out of Egypt in the past several weeks was yesterday’s central bank announcement that foreign exchange reserves fell sharply during July. Liquid reserves fell by a quarter, from $7.8 billion to $5.9 billion. Al Ahram reported:
Egypt’s net international reserves fell in July after inching up for three months in a row. Figures from the Central Bank of Egypt (CBE) published on Tuesday showed that Egypt’s foreign currency reserves stood at some $14.42 billion by the end of July, down from $15.53 billion in June.
The CBE said on its website that the fall was due to maturing Egyptian bonds and payment of the Paris Club member countries’ debt totaling some $1.64 billion.
Source. Central Bank of Egypt
Saudi Arabia, that is, didn’t peel off a single dinar for the flailing Egyptians during the month of July, despite Prime Minister Morsi’s high-profile trip to Riyadh during the middle of the month. With liquid reserves below $6 billion (the rest is gold, credits at the IMF, and a few other illiquid items) Egypt can pay for another two months of its trade deficit. The Saudis do not want to feed the mouth that bites their hand.
A great deal of wishful thinking arose from Morsi’s visit about a new Saudi-Egyptian rapprochement, supposedly motivated by common opposition of the two Sunni Muslim countries to Iran. An example of this type of thinking came from Prof. Fouad Ajami in Tablet. The Saudis fear the Muslim Brotherhood, though, as much as they fear Iran: the Brotherhood’s updated Islamism combines traditional religious authority with the organizing methods of modern totalitarian parties, and represents the most credible internal challenge to the Saudi monarchy. Saudi Arabia supported deposed Egyptian president Hosni Mubarak and bitterly rued his overthrow.
Evidently the Egyptian Supreme Council of the Armed Forces and its Saudi backers intend to let the Morsi government take the blame for Egypt’s impending economic disaster. The assault on Egypt’s prime minister at the soldiers’ funeral may mark the decline of the Islamist organization. The only friend the Muslim Brotherhood has left is the Obama administration, which cannot — in an election year — give the Morsi government what it needs the most: enough money to get through the next few months.