Jan. 4 - Just two years after Egypt was liberated in the Arab Spring, its economy is in tatters, and there are worries about investor confidence in the country where 40% of food is imported. Joanne Nicholson reports
Egypt's currency may be in dire straits but investors are still betting the government will save it. The Egpytian pound has fallen more quickly in the past week. Despite this, the stock market has risen in the first few days of January. But not everyone shares investors' optimism. Khaled Nagah is a financial analyst in Cairo (SOUNDBITE) (Arabic) FINANCIAL ANALYST, KHALED NAGAH, SAYING: "All that happened is just a repeated wave of stock buying from Arabs, and Qataris in particular. On the last day that the market was open, the performance of the Egyptian stock market was very good, but despite that performance, we witnessed a strong sell-off towards the end of that session, the last of 2012. So, there is no logical explanation but we can attribute it to New Year optimism in the first days of 2013." The Egyptian pound has lost about 10 percent against the US dollar since the revolution just under two years ago. And the recent political turmoil over a new constitution has piled on the pressure. Egyptians have been scrambling to sell currency, forcing the central bank to impose a new regime to try and preserve depleted foreign exchange reserves. Economists have warned that the central bank only has enough left to cover just over two months of Egypt's import bill. 40 percent of Egypt's food is imported and a weaker pound means the extra cost will be passed on to consumers. Ratings agency S&P recently cut Egypt's credit rating to the same level as Greece. Investors are becoming more concerned about Egypt's ability to repay its debts, so may demand higher interest rates. But, says Middle East expert, Gala Riani, Egypt still has a lot going for it. SOUNDBITE (English) GALA RIANI, MIDDLE EAST ANALYST, CONTROL RISKS, SAYING: "Egypt is one of the more important economies in the region and has been for a very long time. It the most populist state. It has a degree of natural resources, a large labour force that's relatively cheap to use." The markets are waiting to see what happens on January 25th - the second anniversary of the ousting of the long-time President, Hosni Mubarak. The current President - Mohamed Mursi - needs to get a handle on the current unrest. He will have to impose unpopular austerity measures if Egypt's to get a 4.8 billion dollar loan from the IM.