Not much left Egypt's foreign reserves have lost $1.7 billion since the end of December 2011. At the end of January, the Central Bank of Egypt (CBE) had $16.4 billion in foreign reserves, which is as low as they have been since 2004. According to a recent Beltone Financial report, the monthly decline rate of international reserves improved slightly, shrinking from 10 per cent in December 2011 to 9.4 per cent in January this year. However, the report adds that foreign reserves are currently barely sufficient to cover just over three months of imports. As such, the bank has reached a critical point. Egypt's monthly imports are estimated at $5 billion. Beltone's report further suggests a number of policy options that the Egyptian government and the CBE should consider, in order to slow down the decline rate. The options include abandoning the currency peg to the US dollar, and partially intervene to allow the Egyptian pound to gradually depreciate. The report also suggests holding on to the peg, while adopting a series of measures. These would include sealing the deal on the International Monetary Fund's (IMF) loan of $3.2 billion, selling land to Egyptians living abroad who would pay in foreign currency, imposing import bans and enforcing capital controls. The report claims that the safest route would be to approve the IMF loan and other external funding, while selling state-owned assets to expatriates. Inflation rate declines to 8.6 per cent ANNUAL headline inflation came to 8.6 per cent in January, compared to 9.6 per cent in December, thanks to a lower increase in food prices. According to Central Authority for Public Mobilisation and Statistics (CAPMAS), food prices increased by 11.2 per cent in January, compared to 3.2 per cent last year. The decline in the food prices increase rate stemmed from depressed spending levels, as shown by limited liquidity. Meanwhile, food prices saw a 34 per cent increase in the value of vegetables in January, compared to the same month of 2011. On a monthly basis, inflation increased by a mere 0.1 per cent, against a drop of 0.2 per cent in December. "Maintained uncertainty is still weighing on private spending levels, which should reflect positively on inflation rate. Yet, renewed tension downtown may create some supply disruptions," according to a CI Capital statement. CI Capital added that this uncertainty, together with the shortage of gas cylinders in various governorates, might impose risks on inflation levels. Economic reform needs $11 billion EGYPT's Minister of Finance Momtaz El-Said said the government's economic reform programme will need about $11 billion to be implemented. El-Said added that the programme will include steps towards reducing public spending and increasing public resources. The programme has yet to be opened for discussion before it is presented to the International Monetary Fund (IMF) as part of negotiations over a $3.2 billion loan to Egypt. The minister said during a meeting last Thursday with a European Union (EU) delegation headed by special representative for the southern Mediterranean Bernardino Leon, that proposed reforms would include changing the general sales tax to a value added tax. Other reforms in the offing include reducing energy subsidies and making sure they reach only those in need, while adopting an amended real state tax system. Moreover, El-Said said that the programme aims to sell Egyptian expatriates state-owned land at lower prices and generate from that about $15 billion in the span of four years. France Telecom buys out Mobinil ORASCOM Telecom Media and Technology (OTMT) has agreed to sell 95 per cent of its stake in the mobile network operator Mobinil to France Telecom. The two telecom giants signed on Monday a memorandum of understanding, according to which OTMT, founded and owned by Egyptian tycoon Naguib Sawiris, will sell its stake at LE202.5 per share. The price offered by France Telecom puts the value of the deal at around $2 billion. This represents a 48.5 per cent premium over Mobinil's closing price last Thursday, at LE136.37. According to Egyptian capital market law, France Telecom need to submit a tender offer to buy the remaining minority shareholders stake at the same price. If all holders decide to sell their shares to France Telecom, the company will end up owning 95 per cent of Mobinil. The Egyptian telecom company will then be delisted from the Egyptian stock market. OTMT currently holds a 20 per cent stake in Mobinil, while about 29 per cent is traded on the Cairo stock exchange. The balance is owned by holding company Mobinil Telecom. France Telecom owns 71 per cent of this company, while OTMT owns the rest. OTMT will continue to hold 30 per cent of voting rights in Mobinil, allowing it to continue to guide the company's strategy. According to Bloomberg news agency, France Telecom is currently refocussing its business plans on fast-growing emerging markets, as mobile revenue in Europe is stalling. The Paris- based company has announced the sale of its units in Switzerland and Austria. In the past two years, it has struck deals to enter Morocco, Iraq and the Democratic Republic of Congo. The agreement is subject to the approval of the Egyptian Financial Supervisory Authority (EFSA). Beltone's brokerage arm for sale BELTONE Financial Holding, one of Egypt's leading investment banks, has put its brokerage arm up for sale. Moreover, the bank is selling an administrative building it owns at Smart Village, on the outskirts of Cairo, in a bid to "maximise returns for investors and increase future growth rates," it said in a statement sent to the Egyptian Stock Exchange. The decision, taken at a board meeting last week, came less than two weeks after its Chairman Alaaeddin Sabaa cancelled a plan to sell his 20 per cent stake in the bank. Ain Sokhna Port strike costs LE10 million a day THE DAILY losses of closing the privately owned and operated Ain Sokhna Port amount to around LE10 million per day, according to the head of the customs authority, Ahmed Farag. Over 900 workers of Egypt's eastern Ain Sokhna Port started an open-ended strike on Sunday, demanding their share of profits since 2008, together with a risk allowance. Management has so far refused to give in to their demands. The port witnessed two similar strikes in September and May last year, with workers demanding a fairer restructuring of wages. Managed by DP World, the port is Egypt's primary seaport for cargo originating from the Far East, and employs around 1,200 permanent and 4,000 temporary workers. Talks with the workers failed after DP World said the workers had no right to demand any such commissions from the firm's profits, even though it was willing to offer hardship allowances, according to Reuters. The company had also shut the port last September over a similar labour dispute workers. Export subsidy sustained The Export Development Fund's (EDF) new Executive Director Ahmed Amawi stressed that the current budget envisages no subsidy reduction for exports. Amawi was quoted as saying that "exports are considered a main pillar to Egypt's economy, and should be supported especially during the coming period." Subsidies allocated for non-oil Egyptian exports during this fiscal year are LE2.5 billion, compared to LE4 billion in 2010. Recent government announcements about new standards to limit export subsidies had many exporters concerned. "There will be no ceiling to the amount of subsidies each company receives, but there will be new regulations that will direct subsidies to the industries that deserve them the most," Amawi added. Draft regulations are being reviewed by export councils before being approved by the Ministry of Industry and Foreign Trade.
