Egypt tries to calm investors; get food to people
Cairo, February 2, 2011
Egypt's government has taken measures to calm investors and help Egyptians hurt financially by unprecedented countrywide protests that have entered their eighth day.
Many Egyptians live hand to month and have felt the strain as protests demanding Mubarak step down spread across the country, disrupting services ranging from food supplies to cash machines.
Seeking to reassure markets, the central bank said on Tuesday it would continue to pay interest on EGP4 billion ($683 million) of maturing Treasury bills it could not redeem because of bank closures.
Trade Minister Samiha Fawzi outlined an emergency plan to get vital foodstuffs and fuel from ports, warehouses and factories to distribution outlets. Banks began allowing limited withdrawals on Tuesday from cash machines.
Fawzi took office on Monday as part of a new cabinet after President Hosni Mubarak dismissed the old one in response to demands by tens of thousands of angry Egyptians that he resign.
Egypt's banking system and stock exchange are nearing their second week of a closure that has stopped business transactions and the payment of salaries. Many of the country's factories and non-food retail outlets have locked their doors.
The central bank, which cancelled a Jan. 30 Treasury bill auction, said it would redeem Treasury bills that matured on Tuesday and transfer the funds to banks when they reopened.
It would pay interest of 8.25 per cent for the period from maturity to the time the funds could be transferred to banks, Deputy Governor Hisham Ramez said by telephone.
Some 1 billion pounds in 91-day bills with an average yield of 9.292 per cent and 3 billion pounds in 182-day bills with an average yield of 10.369 per cent matured on Tuesday.
Investors are required to pay 20 per cent income tax on Treasury bills and bonds but not on bank deposits, which makes the 8.25 per cent yield attractive, a Cairo-based bond trader said.
'It should calm down investors. It indicates that the financial system is not fully collapsed in Egypt and that the central bank is willing to meet its obligations in a timely manner,' the trader said.
Food, cash supply problems
Fawzi said the country was having problems getting wheat, flour, rice, sugar and cooking oil to the people who needed them, even though ports, factories and warehouses had sufficient supplies, Egypt's official news agency MENA.
The delivery of raw materials to factories and fuel to the transport system and bakeries was also a problem, compounded by the continuing closure of banks.
Finance Minister Samir Radwan, who also took office on Monday, announced state banks were reopening their cash machines to pensioners and government employees to withdraw up to 1,000 Egyptian pounds a day in pensions and salaries.
The Trade Ministry said it recommended mobilising public and private transport and the military to help in the deliveries and to allow trucks to operate during curfew.
This included a request the military help the central bank deliver funds to banks to pay food importers and worker salaries, Fawzi said.
The logistics of ensuring vehicles bringing cash to bank branches were safe from looters had become a problem, with security companies insurance companies likely to hike their rates for the physical transfers, a banker said.
Many cash machines have been smashed by looters and most others were shut down.
A substantial part of Egypt's economy is still based on cash and credit and debit cards only became common among wealthier classes in the last decade. Millions of poor Egyptian rely indirectly on banks to collect salaries and pensions.
With banks closed, many Egyptians were having to borrow from friends and family for basic needs.
The state news agency MENA quoted bank officials on Tuesday as saying machines were being loaded and cash was already available at some. A number of machines belonging to foreign-owned banks HSBC and NSGB were working on Tuesday, residents in the upscale neighbourhood of Zamalek said.
It was unclear if employees of private companies, where salaries are often paid on about the first of the month, would have access to funds through machines. Most factories and retail shops apart from food outlets have been closed since Thursday. – Reuters