Briefs: Another downgrade Egypt's credit rating by Standard & Poor's on the back of concern that a new government may fail to contain a growing budget deficit and put a break on declines in international reserves. Long-term foreign currency sovereign credit rating was cut to BB- from BB and its long-term local currency rating was cut to BB- from BB+. Short-term rat- ings of B for both foreign and local currency debt were affirmed. S&P is maintaining a negative outlook on the rating. Egypt's budget deficit reached 9.5 per cent of GDP in fiscal year 2010/11 up from 8.1 per cent a year earlier. Reserves are down to around $24 billion from $36 million in December 2010. This is not the first downgrade for Egypt; since the outbreak of the revolution in January, several rating agencies have repeatedly downgraded Egypt's credit rating. El-Beblawi: 'External borrowing inevitable' EGYPT'S dependence on local borrowing to support the state budget is not sustainable, and the state will have to borrow from overseas, Minister of Finance Hazem El-Beblawi told Egyptian daily Al-Ahram. El-Beblawi added that Egypt is reconsidering seeking support from the International Monetary Fund (IMF), noting that foreign borrowing is necessary in order to tackle deficit. The minister also told the paper that according to the plan presented in the Deauville Partnership Finance Ministers' Meeting, Egypt needs a $45.5 billion financing scheme till fiscal year 2013/2014, with around $24 billion aimed towards tightening the fiscal deficit. The Deauville Economic Partnership was activated last month where Kuwait, Qatar, Saudi Arabia, Turkey and the UAE have joined nine regional and international financial institutions to support Egypt, Jordan, Morocco and Tunisia. The group brought the support package through 2011-2013 to $38 billion up from the previously announced $20 billion. Costly Arab Spring ARAB countries which have been swept by revolutions this year have shouldered productivity losses reaching around $56 billion from the beginning of uprising until September 2011, a recent report finds out. According to the report which was published by Geopolicity, a global consultancy group, using data from the international monetary fund, Egypt, Libya and Syria took the biggest hits. The cost of their Gross Development Product (GDP) was more than $18 billion, while the cost of their public finances totalled over $33 billion. Bahrain and Yemen were among the countries hit hard economically by the protests. Although the report said it is difficult to determine the precise cost of the Arab Spring, it mentioned that oil-exporting countries that avoided unrests have benefited the most. For example GDP growth in the UAE amounted to $62.8 billion. Impact on the UAE public revenues was positive as well coming to 31.8 per cent. Geopolicity's report also pointed out that international support has fallen way short of expectation. It goes on to say that "the support promised by G8 at the May 2011 Deauville summit has to a large extent not materialised; and the impact of the now $100 billion in support through the Breton Woods organisation will, from a grassroots perspective, be trickle down at best." Moreover, it referred to the slow pace of European financial support for Arab countries in question and attributed the reason for that mainly to the current financial crisis sweeping Europe and that there is no "clear roadmap to facilitate EU and US engagement." The report points out that unless a regional roadmap is established around G20/G7 that can provide financial support, country based loans through the World Bank and IMF will have little impact on the reform process. TE employees on strike EMPLOYEES of Telecom Egypt (TE), the country's sole provider of fixed line services, have been on strike since Sunday. They are demanding that the board of directors resign, while they also want its members to be questioned over alleged mismanagement over recent years. They also want the disparities between senior company official and employee salaries to be resolved. TE management sent employees an internal memo saying the company has spent LE635 million since the beginning of the year on improving employee benefits salaries, while setting the minimum productivity bonus at LE80 and increasing food allowances to LE16 million. TE also highlighted that it expects the salary restructuring programme to be complete by 2012. Employees are threatening to cut off Egypt's Internet and fixed-line services, as well as telegraph and phone directory services if their demands are not met. The company CEO Mohamed Abdel-Rahim said he has no intention to resign. Striking employees are also requesting the release of five of their colleagues, currently in police custody after they held Abdel-Rahim hostage for 20 hours in a bid to force him to resign. Till Tuesday the strike included workers at 37 centres across Egypt. LE11 billion for wheat purchases THE MINISTRY of Finance has allocated more than LE11 billion to buy wheat from farmers this fiscal year. This sum is larger than last year's, as the ministry decided to raise the price at which wheat is bought from farmers from LE350 per ardeb to range between LE380 and LE400. This is higher than the international price, which hovers around LE255 per ardeb. A senior official said that while last year the price for domestic wheat was set at LE350 per ardeb, this year the ministry is prioritising the encouragement of farmers to cultivate wheat by offering them high prices despite the decline in international prices. The cabinet has not yet approved the ministry's suggested price of LE380. Egypt's wheat reserve is currently big enough to meet the country's needs for six months. Banking law amended The number of directors sitting on the Central Bank of Egypt (CBE) board will decrease to nine from its current 15 members, according to new amendments to the banking law. Other amendments included in a decree issued by the Supreme Council of the Armed Forces prohibits members of the CBE board of directors from holding senior posts in commercial banks, in order to avoid conflicts of interest. The last amendment, according to CI Capital, was already taken into account in last month's managerial reshuffles in public sector banks. Fewer subscribers quitting Mobinil The Egyptian Company for Mobile Services (Mobinil) is witnessing fewer cancellations, Reuters quoted the company Chairman Alex Shalabi as saying. Cancellations to Mobinil subscriptions peaked this year as hundreds of subscribers were offended by a cartoon posted by company founder Naguib Sawiris in June 2011. The cartoon posted on Sawiris' Twitter account was viewed by many as mocking Islam. On another front, Mobinil is aiming to start talks with the Egyptian government related to offering 4G services, which include high-speed data transfer. Savola buys two local pasta factories SAUDI Arabia's Savola Group signed an agreement on Monday, buying a 78 per cent stake in two Egyptian firms for LE557 million, according to Reuters. A Savola statement added that the two firms, Al-Malika and Al-Farasha, work in the field of manufacturing and marketing pasta both inside and out of Egypt. They run two factories in Egypt with a production capacity of 120,000 tonnes per annum, with a market share of 30 per cent. Saudi Arabia invests in local treasury bills SAUDI Arabia plans to invest $500 million in Egyptian treasury bills, and will give Egypt another $500 million in budgetary support, Bloomberg reported, citing the Saudi Arabian Ambassador to Egypt Ahmed Al-Rattan. Moreover, Saudi Arabia's Development Fund has finalised its negotiations with the Egyptian government, whereby a $1.45 billion aid package will be handed over. This sum includes $200 million for small and medium enterprise project financing, $500 million in low-interest loans to be invested in priority sectors, and $750 million as a credit line to import non-oil products from Saudi Arabia.
