Fuel crunch contained WHILE the streets of Egypt were packed with demonstrators demanding that President Mohamed Morsi leave office this week, the long lines of cars queuing in front of petrol stations to buy petrol were also getting shorter. “The crisis is now over, after the quantities we receive of 80-octane and 92-octane gasoline have been doubled,” said one employee at a petrol station in Cairo's Mohandessin neighbourhood that saw long queues of cars in front of it throughout last week. The crisis almost paralysed Cairo's streets last week, with queues extending for dozens of metres and people spending up to five hours waiting to fill their petrol tanks. A statement issued by the Ministry of Petroleum said it had increased the supply of petrol by 25 per cent in a bid to address the problem. Petroleum Minister Sherif Haddara said that the additional quantities, along with on-the-ground inspections of petrol stations, had helped to contain the problem. Improvements have been felt on the ground. Mohamed Samir, who waited for three hours to fill his tank last week, said that it had not taken him more than 10 minutes to fill up on Monday. Head of the General Division of Petroleum Products at the Federation of Egyptian Chambers of Commerce Hossam Arafat ascribed the improvement to the new availability of cash, due to the new allocations to buy oil products in financial year 2013/14, which started on Monday. Arafat said that at the end of the previous financial year the government had lacked allocations of cash to import the country's fuel needs, causing shortages. “The severity of the shortages was due to the government's weak and unprofessional way of handling the crisis,” he added. He said that the government should have distributed the limited available quantities equally to all governorates. “People don't trust the government's statements about the availability of fuel, which in turn prompts them to buy more fuel even if they don't need it,” he noted. While officials said last week that 70 per cent of the problem had been solved, the lines in front of petrol stations seemed to be getting longer. Arafat attributed part of the problem to the absence of security at petrol stations, saying that in some cases criminals had forced stations to give them quantities of subsidised fuel so that they could then sell it on the black market. Petroleum products in Egypt are sold at artificially low prices through an energy subsidies programme that eats up a fifth of the government's expenditure and adds significantly to the budget deficit. The total bill for energy subsidies is targeted to reach some LE100 billion in 2013/14. While the government had targeted LE70 billion for subsidies in fiscal year 2012/13, actual spending on energy subsidies reached LE120 billion due to the failure to implement reforms. The International Monetary Fund (IMF) has been asking Egypt to cut its gaping budget deficit and pursue a national economic reform plan in return for a $4.8 billion loan. Minister of Finance Fayad Abdel-Moneim was quoted by Al-Mal newspaper last week as saying that negotiations with the IMF had been put off to August on the back of reservations expressed by the Fund over the government's plans to rationalise energy subsides. The government was currently carrying out technical amendments to the programme, he said. Starting in June, the Ministry of Petroleum embarked on a new smart-card system to distribute subsidised petroleum products. The new system is intended to regulate the distribution of subsidised fuel in a way that will curb smuggling and black-market sales and allow the subsidised fuel to reach its intended targets. Another blow to tourism THE CURRENT unrest in Egypt has led several foreign governments to urge their citizens to cancel travel plans to the country, thus adding to the industry's suffering. Travel warnings were issued by the US State Department and the UK Foreign And Commonwealth Office on 28 June, asking US and UK citizens in Egypt to avoid demonstrations and to remain alert to local security developments as a result of the political unrest that has intensified on the first anniversary of president Mohamed Morsi's coming to power. Similar warnings were issued by other countries, including Canada, the Netherlands, Australia and Russia. “Occupancy rates in Cairo hotels dropped this week to an average of 15 per cent, down from about 40 per cent last month,” said Nagui Erian, deputy head of the Egyptian Chamber of Hotel Facilities. Despite the fact that the safety warnings excluded tourist sites like Luxor, Aswan and Sharm El-Sheikh, which are far from the demonstrations, the mere issuance of such warnings has been negative on the flow of tourists. According to Erian, occupancy rates in Hurghada and Sharm El-Sheikh, Egypt's best-known coastal tourism destinations, decreased from 60-70 per cent earlier to approximately 40 per cent today. Most of those staying are now Egyptians or tourists already staying before 30 June. Hesham Zaazou, the former minister of tourism, was quoted by the Saudi daily Asharq Al-Awsat on Monday as saying that there had been many cancellations by British travel agents for July and that there had been slowdowns in other main European tourism markets. “Future reservations will be severely affected if the current demonstrations take a violent turn,” Zaazou said. The Egyptian Tourism Federation warned in a press statement on Monday that the ongoing crisis could hit the tourism industry hard if no political solution was found. “The industry will not be able to withstand another major crisis,” the statement said. Egypt's tourism industry has suffered as a result of the political instability and occasional violence that has occurred in the country since the 25 January Revolution, with revenues declining by a third in 2011. Things got better during 2012, but they were still far from pre-revolution levels. “Industry workers, businesses and investments will be affected heavily by any violence that might erupt among the protesters, and we will lose tourism markets that will be hard to compensate for,” Erian said. Fears that violence could spread put Egypt bottom for safety and security in a recent travel and tourism report by the World Economic Forum, behind Chad, Pakistan and Yemen. When Al-Ahram Weekly went to print, the streets of many of Egypt's larger cities were occupied by protesters waiting for a possible intervention by the army to put an end to the political crisis now facing the country.
THE CURRENT unrest in Egypt has led several foreign governments to urge their citizens to cancel travel plans to the country, thus adding to the industry's suffering. Travel warnings were issued by the US State Department and the UK Foreign And Commonwealth Office on 28 June, asking US and UK citizens in Egypt to avoid demonstrations and to remain alert to local security developments as a result of the political unrest that has intensified on the first anniversary of president Mohamed Morsi's coming to power. Similar warnings were issued by other countries, including Canada, the Netherlands, Australia and Russia. “Occupancy rates in Cairo hotels dropped this week to an average of 15 per cent, down from about 40 per cent last month,” said Nagui Erian, deputy head of the Egyptian Chamber of Hotel Facilities. Despite the fact that the safety warnings excluded tourist sites like Luxor, Aswan and Sharm El-Sheikh, which are far from the demonstrations, the mere issuance of such warnings has been negative on the flow of tourists. According to Erian, occupancy rates in Hurghada and Sharm El-Sheikh, Egypt's best-known coastal tourism destinations, decreased from 60-70 per cent earlier to approximately 40 per cent today. Most of those staying are now Egyptians or tourists already staying before 30 June. Hesham Zaazou, the former minister of tourism, was quoted by the Saudi daily Asharq Al-Awsat on Monday as saying that there had been many cancellations by British travel agents for July and that there had been slowdowns in other main European tourism markets. “Future reservations will be severely affected if the current demonstrations take a violent turn,” Zaazou said. The Egyptian Tourism Federation warned in a press statement on Monday that the ongoing crisis could hit the tourism industry hard if no political solution was found. “The industry will not be able to withstand another major crisis,” the statement said. Egypt's tourism industry has suffered as a result of the political instability and occasional violence that has occurred in the country since the 25 January Revolution, with revenues declining by a third in 2011. Things got better during 2012, but they were still far from pre-revolution levels. “Industry workers, businesses and investments will be affected heavily by any violence that might erupt among the protesters, and we will lose tourism markets that will be hard to compensate for,” Erian said. Fears that violence could spread put Egypt bottom for safety and security in a recent travel and tourism report by the World Economic Forum, behind Chad, Pakistan and Yemen. When Al-Ahram Weekly went to print, the streets of many of Egypt's larger cities were occupied by protesters waiting for a possible intervention by the army to put an end to the political crisis now facing the country. EGX30 resilient AS RIVAL demonstrations took to the streets this week, Egypt's main market index, the EGX30, looked surprisingly unaffected by the protests. Tuesday's transactions witnessed the CASE30 recording its the biggest increase in a year after the military gave President Mohamed Morsi on Monday afternoon 48 hours to find a solution to the country's political impasse. The EGX30 Index jumped 4.9 percent narrowing the index losses year to date to 8.7 per cent. Defying fears of the possible outcomes of the rallies, foreign investors saved the day on 30 June by being net buyers, even as Egyptian and Arab investors were net sellers. Market observers attributed the hike to bargain hunting by foreign investors, as shares were being very attractively priced with the political risk already factored in. The following day the stock exchange was closed to mark the beginning of the new fiscal year. 30 June was the last trading session in a month that saw a series of incidents resulting in the market's main index facing its steepest monthly drop since November and losing 12.6 per cent of its value. The incidents included tensions between Egypt and Ethiopia over the River Nile, President Mohamed Morsi freezing diplomatic relations with Syria, and the build-up to the 30 June protests aimed at removing the president from office. Five-year contracts that protect against default rose by 12.5 basis points on Sunday, the highest on a closing basis since Bloomberg started tracking the contracts in 2009. The country's risk, among the highest 10 countries in the world, for the first time climbed above that of Pakistan, which has the same junk rating of Caa1 at Moody's Investors Service. According to news agencies, the EGX30 index entered a bear market on 12 June, after tumbling 23 per cent from a peak in September. Morgan Stanley, the investment house and index provider, said this month that it may review Egypt's 12-year-old emerging-market status for a possible downgrade should the nation's currency shortage worsen. The newly appointed head of the Cairo stock exchange said that the market would operate normally during this week's demonstrations. He also insisted that there was no need to impose new precautionary price limits to hedge against possible sell-offs should things escalate on the streets. Cairo's stock exchange was closed for a month after the 25 January Revolution, a move criticised by market experts, who noted that the Wall Street exchanges in New York were only closed for one day after the 9/11 events. Egyptian stocks lost 30 per cent of their value in 2011, and the market has been muddling through since then as a result of the effects of political problems, flawed economic policies and violence in the streets. Subdued demand DEMAND for foreign currencies remained low during transactions earlier this week, despite the fact that most foreign exchange bureaus closed their doors on Sunday as a precautionary measure out of fears of a lack of security during the anti-regime protests sweeping Egypt's streets. Belal Khalil, deputy head of the exchange division of the Federation of Egyptian Chambers of Commerce, told Al-Ahram Weekly that the limited demand had been the trend since last week during the build up to the June 30 demonstrations. The Egyptian pound had maintained the previous Thursday's levels, trading at LE7.04 against the US dollar, LE9.59 against the euro and LE11.2 against the sterling, he said. According to Khalil, prices were slightly different at the exchange companies, where the dollar was being sold for LE7.65, while the euro and sterling were trading at LE9.97 and LE11.7, respectively. Khalil attributed the low demand for foreign currencies, especially the dollar, to the wariness of customers who were afraid of fluctuations in the foreign exchange market and were opting to postpone purchases of other currencies. “Many people who possess the US currency believe the Egyptian pound will depreciate against the dollar during the coming days, so they refuse to sell at the moment,” he said. Additionally, Khalil said, many importers had decided to halt their businesses since last week in anticipation of the June 30 events, leading to weaker demand for the dollar and the euro. Plans for mass demonstrations organised by the opposition and its supporters led most of the estimated 300 exchange companies in Egypt to close their branches on Sunday, fearing violent clashes. “I decided not to open my company's branch starting on 30 June and until all the demonstrations end,” said Ahmed Badr, manager of the Foreign Exchange Company in downtown Cairo. “No one can predict when violence will erupt,” he added. Badr also confirmed that demand for foreign currencies had fallen to a minimum days before Sunday's protests. Khalil said that 90 per cent of the exchange companies had started dealing with customers again on Monday and that those in areas near to the demonstrations were the only ones now remaining closed. The dollar's value followed an upward trend against the Egyptian pound during the fiscal year 2012/13, from LE6.05 in June 2012 to its current value of LE7.04, its highest value in more than 10 years. A dry run for Ramadan PEOPLE rushing to Egypt's hypermarkets and supermarkets to stock up on food in the two days preceding the 30 June anti-regime protests found shortages of some foodstuffs, with increased demand being fed by many shops, banks, supermarkets and grocery stores deciding to shut down on Sunday for fear of attacks like those experienced during the 25 January 2011 Revolution. Markets that had been thronged with customers until midnight on Saturday looked relatively empty during the early days of this week, even as the countdown to the weekend's protests witnessed a shopping frenzy with people hoarding staples amid worries that there could be shortages if the protests got out of hand. The protests also came just weeks before the beginning of Ramadan, always a time for Egyptians to stock up on food in preparation for the holy month which is expected to begin on 10 July. High demand for food products has pushed up prices during the past few weeks, and this is expected to continue during Ramadan. While poultry prices have not risen due to the strong domestic and imported supply, the prices of other types of meat are expected to rise by up to 30 per cent during Ramadan in comparison to last year. The prices of almonds, hazelnuts and pistachios have risen by as much as 50 per cent over last year, due to the hike in customs duties imposed on imports in addition to the depreciation of the Egyptian pound which makes imports more expensive. Hisham Mahmoud, who bought his family's needs for Ramadan earlier this year fearing unrest, said that the price of imported raisins had risen to LE42 per kilo compared to LE32 last year. Qamareddin, used to make the apricot juice widely consumed during Ramadan, had risen in price from LE9 per kilo last year to LE15 this year, he said. In a bid to control the prices, the Ministry of Supply and Internal Trade implemented a package of measures earlier this year, including flooding the market with consumer goods and developing plans to prevent price manipulation. Teams of officials from government and civil society organisations have been formed to monitor prices in markets in major provinces, these being linked to an operation room at the ministry which follows up on citizen complaints seven days a week. In cooperation with the ministries of agriculture, investment and local development, the Ministry of Supply and Internal Trade plans to offer at least 20 basic food items at state-owned retailers at a 15 per cent discount during Ramadan. Rice, sugar, oil, butter, vegetables and dairy products are among these items.
