By Farah Halime, a business journalist in Cairo and Visiting Fellow at the European Council on Foreign Relations focusing on Egypt’s economy. This post originally appeared on Rebel Economy.
Wait, Did 613 factories shut down or over 4,500?
Egypt’s central bank held a bumper auction on Wednesday, selling $1.3 billion from its foreign reserves to cover strategic imports such as wheat, meat and cooking oil. As the country grapples with an economic crisis, the central bank’s foreign currency sales are an attempt to keep the Egyptian pound strong and reassure the nation that the government can afford basic commodities.
But as Patrick Werr, economics reporter at Reuters writes:
Despite the sales and a more expensive dollar, businesses have racked up hundreds of millions in unfulfilled requests for foreign currency, forcing them to turn to a black market that has mushroomed in recent months.
And on the black market, the pound has depreciated, showing that a strengthening pound on the official market isn’t as accurate as the central bank may want to convey.
Meanwhile, 613 factories have shut down in Egypt in recent months, the trade minister Mounir Fakhry Abdel Nour said in an attempt to correct a statement from the minister of manpower Kamal Abu-Eita, who announced a few weeks ago that more than 4,500 factories had closed in Egypt since the revolution. The latter figure had come from a Centre for Trade Union and Worker Services report released earlier this year, but the methodology was questioned.
The fact that the new trade minister is trying to downplay the number of closures is not a very good sign, but it’s an even worse signal that he’s questioning the figures of his colleague, the minister of manpower.
Either way, even at just 613 factories, that is a big blow to Egypt’s industrial sector, one of the major backbones for the economy. Though the Morsi administration and the caretaker government before that had discussed investing money to re-open factories, nothing ever came to fruition.
Many of these factories are hit by multiple problems including power cuts, strikes, poor security, and difficulty securing loans in credit markets where they are squeezed out by an indebted government. By Farah Halime.
The CEO of Egypt’s biggest construction company, Orascom, signaled that the firm is “exploring its legal options” with regards to its $1 billion tax settlement with the Morsi administration. If the decision is overturned, it would be a symbolic victory for the business tycoons who have laid low since the end of the Mubarak era. Read... The Return Of Egypt’s Elite.
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