CAIRO – With the beginning of the Muslim fasting month of Ramadan, the Saudi riyal has risen against the Egyptian pound. Forex traders attribute the riyal's rise to seasonal factors, citing Umrah (lesser pilgrimage that can be performed all year round). "It is normal at this time of the year. Demand for the Saudi riyal and the US dollar jumps in Ramadan. The Saudi riyal rose to LE1.59 from LE1.56," Hamdy Hassan, a Cairo-based Forex trader, told the Egyptian Mail in an interview. Around 120,000 Egyptians are forecast to perform the Muslim rituals of Umrah this month, according to the Ministry of Tourism. Roughly 770,000 Egyptians perform Umrah every year, according to official data. The number of Egyptian pilgrims totalled 78,000 last year. Roughly four million Muslims performed Hajj rituals, according to Saudi official statistics. "Egyptians love to perform Umrah all year round. Some people do it twice or even three times a year," Hassan said. The US dollar has made a slight gain, rising from LE5.96 to LE5.97. The greenback has been gaining more ground on the local market against the Egyptian pound after the January 25 Revolution despite falling against other major currencies. "The cost of living in Saudi Arabia is high compared to Egypt. Egyptians love to shop there. Therefore, it's natural for the riyal and the dollar to make seasonal gains during Ramadan and ahead of Hajj or pilgrimage to the holy cities of Mecca and Medina," he explained. From January to June, Egypt's foreign reserves shed $9.5 billion. They stood at $26.56 billion at the end of June, according to the Central Bank of Egypt (CBE). Foreign reserves totalled $36 billion at the end of December. Although Hajj and Umrah are religious rituals, they have turned into shopping sprees for many people. Last year, pilgrims spent around $8 billion in the holy cities, according to Saudi official statistics. Food alone accounted for roughly 40 per cent of expenditure due to growing inflation in Saudi Arabia. Egyptians spend $3 billion annually on Hajj and Umrah, according to the Central Agency for Mobilisation and Statistics (CAPMAS). As more than 1.5 billion Muslims worldwide observe the holy month with fasting and piety, Ramadan is a blessing for the Saudi economy, as demand for Umrah spirals, analysts say. "For Saudis, it is a boom in tourism as hotel occupancy in the holy cities reaches very high levels. It is also a blessing for shopping malls. But for Egypt, the season is a time for hard currency outflow," said Mohamed Youssry, a financial expert. "Currency outflow affects the balance of payments negatively. There's a need to reduce the gap in Egypt's balance of payments to alleviate pressure on the local pound," Youssry explained. The country's macroeconomic landscape has been in the doldrums due to lower production rates, worker protests and strikes nationwide. Over the first nine months of the fiscal year 2010/11, the balance of payments posted a deficit of $5.5 billion against a surplus of $3.1 billion a year earlier, according to CBE data. "The trade deficit fell slightly by 0.7 per cent to $18.4 billion. That was the result of a pickup in merchandise exports and imports. Exports rose by 11.5 per cent to $18.9 billion, reflecting the increase in oil and non-oil exports by 17.2 per cent and 7.4 per cent respectively," the CBE said in statement on its website. "The capital and financial account saw a reversal from a net inflow of $7.1 billion to a net outflow of $968.9 million in the period under review. Flow analysis showed that the period of July/Dec. 2010 posted a net inflow of $4.6 billion, while January-March 2011 posted a net outflow of $5.5 billion, due to foreigners' massive selling of securities, especially Egyptian treasury bills, which brought about a net outflow of $4.9 billion," the CBE statement said. "Net foreign direct investment (FDI) in Egypt plummeted by 51.8 per cent in July-March 2010/2011, posting only $2.1 billion, against $4.3 billion a year earlier," it added.
