DOHA/CAIRO: Egypt’s wealthy benefactor Qatar dampened speculation Monday of rapid extra funding to help Cairo through a currency and budget crisis, as pressure grows at home on the Islamist government to come clean about the state of the economy.
With public anger rising over shortages of diesel fuel, the Cairo government dismissed two top energy industry officials over distribution problems, but skeptical Egyptians say they think the state no longer has the money to import enough oil.
Cairo wants to negotiate a $4.8 billion IMF loan to rebuild its dollar reserves and confidence in the Egyptian pound, but analysts say a full deal seems unlikely for months as the country endures protests, violence and uncertainty over the date of parliamentary elections.
Speculation has been rife in Cairo that President Mohammad Mursi would turn again to Qatar, which has already helped out with soft loans and deposits at the Egyptian central bank in the two years since the fall of autocrat Hosni Mubarak.
However, Qatari Finance Minister Youssef Kamal disappointed hopes that more money was on its way soon. “We already announced $5 billion,” he told Reuters. Asked whether Doha expected to provide more, he replied: “Not yet.” He did not elaborate.
Qatar reveals few details of its financial transactions and it is unclear if the $5 billion in help for Cairo it has announced has been fully disbursed.
Egypt’s needs are urgent. Qatar’s money so far has failed to reverse a slide in its foreign currency reserves to $13.5 billion at the end of February – enough to cover little more than two months’ imports.
In a sign of economic stress, Petroleum Minister Osama Kamal dismissed the head of state-owned Misr Petroleum and a top official in the petroleum authority Sunday, blaming them for a crisis in distributing diesel used by buses and trucks.
The state news agency MENA reported that Kamal had ordered the supply of an extra million liters of diesel to military-run filling stations, aiming to ease shortages which have been dragging on for months.
Increasingly, Egyptians are unwilling to accept that fuel shortages are due merely to official incompetence.
Prominent TV anchor Lamis alHadidy challenged the official accounts: “Again, they are telling us that the problem lies with the amount of fuel in filling stations, not with cash or that the government has no money to import fuel.”
“They have to stop saying that and be frank with the people,” she yelled on air on the CBC private satellite station, which is mostly critical of Mursi and his Islamist backers, after reading the news of the dismissals.
International traders say Egypt has cut back on planned oil imports, canceling one crude purchase tender and reducing the size of another for gasoil. “They need oil but they have no money,” said one trader last week.
Tensions are rising on the streets of Egyptian cities, with protests and violence frequently erupting over a variety of grievances. Behind the immediate causes lies a general malaise as Egyptians struggle with falling living standards, pushing ever greater numbers into outright poverty.
Egyptians want Mursi’s government to be more honest with its people. “This is a failed government that is unable to face up to its problems and challenges, and that is why it finds it so difficult to confess them to the people,” said Ahmad Mohammad, a 70-year-old retired private company employee.
“Soon it will have to admit the problems when it can no longer buy the fuel. Given the recent economic signs, this stage will come soon,” he told Reuters on a street in downtown Cairo.
Inflation jumped to 8.2 percent in the year to February from 6.3 percent the previous month, with an even greater rise in food and drink prices particularly hurting the poor.
The central bank succeeded in bringing the fall in currency reserves almost to halt last month, but only by rationing the supply of dollars to commercial banks.
This is crippling small- and medium-sized private businesses, which are forced to buy dollars on the black market at exchange rates that often wipe out their profits. Long-term economic damage is likely unless currency supplies improve rapidly.
The government is putting on a brave face, saying it has no need of any bridge loans from the International Monetary Fund to keep the state running until after parliamentary elections.
“The cure for the budget deficit needs broad structural measures and the help we are requesting from the IMF is not quick fixes,” Planning Minister Ashraf al-Araby said Sunday.
Energy subsidies are putting a huge burden on the state budget as the falling pound inflates the cost of oil imports, and the government forecasts the deficit will hit 12.3 percent of Egypt’s entire annual economic output this financial year unless reforms are made rapidly.
The IMF has yet to respond publicly to Egypt’s invitation for loan talks and analysts say it seems reluctant to negotiate on a full deal during the current political chaos.
Last month Mursi called parliamentary elections to start in April, only for a court to cancel his decree. Now no one knows when voting will get under way.
This turmoil is hurting business. Telecom Egypt reported a 12.8 percent fall in its full-year net profit Monday. This was partly due to customers switching from its fixed-line services to mobile phones.
However, the firm also blamed the economy, although Chief Executive Mohammad Elnawawy said he was optimistic about the long-term business and political outlook.
Samir Azmi, head of technical analysis at Blom Egypt Securities, was more cautious: “Nothing keeps going down forever, but I can’t see any other practical reasons behind such optimism as long the status of the country remains unchanged.”