Egyptian Debt Getting Dodgy.

[Hafiz]

Egyptian Debt Getting Dodgy.

Even al Ahram/Pravda is reporting that two recent attempts to raise small amounts of sovereign debt have failed because the market wanted more than 18% interest. (how long do you think Egypt can pay 18% on a minimum of $US100 billion external debt (maybe not all of it is at that rate but it has at least $US200 billion internal debt owed to the local banks and local investors).

Six days ago a third debt auction failed to attract interest. Reuters says this is part of a larger problem as capital retreats from risky markets and $US6 billion has been got out of Egyptian sovereign debt since March and the local stock market is a bit wobbly – possibly by foreigners wanting their cash out. https://www.reuters.com/article/egypt-t ... SL8N1W336B At the same time other than oil and gas few/no western companies want to invest in Egypt.

Looks like the signs, debt, stock market and direct investment are starting to look troublesome.

There is also huge domestic debt owed to citizens and local banks who loan to the government in such large amounts they have little for the private sector. Here is the minimum domestic sovereign debt:



The accumulated interest on domestic debt certificates puts the total at over E7 trillion. https://www.ceicdata.com/en/egypt/domes ... rtificates

This is odd because Moody’s in particular has been saying for 6 months that the debt was easy to sell (very oddly on the Dublin market) and that rates were going down. Credit rating movements have also been positive or not negative but I don’t trust Moody’s for the following reasons. They have no physical presence in Egypt but rely on data from dubious local alliances to draw its conclusions about Egypt including RiskMatrix in corrupt Cyprus and a joint venture in Egypt with a local company called Meris whose business is evaluating mainly property development floats, often the dirtiest like Palm Hills, its publications and activities since 2016 are zero, its chairman appears to be an engineer but that was found out through the back door because it is secret about its board and all its employees and customers. It says its listed on the stock exchange but I can’t find it. https://english.mubasher.info/countries ... ock-prices. Its website provides links to more information about the company but these are a dead end after years – wonder why. There is nothing on its site to show they have ever done any business outside Egypt or ever done ratings of any project that involved an international company of repute. If Moody’s relies on this company for Egypt information they are fools – that they have a joint venture with them is beyond belief. They have learnt little from their 2008 mistakes. https://merisratings.com/#page-1780.

The current debt sold over the past few years is on remarkably short maturity – sometimes 6 months. As I understand its repayment on maturing debt is through new debt. Therefore if they face chronic problems with new debt they are in real trouble and much/most/all of the reserves in the Central Bank are bull. They are not accumulated profits or trade balances – they are overwhelmingly debt and not an asset but a liability. There maybe some Saudi cash there and some hard currency from overseas remittances. No one is sure about how much of the reserves are dollars raised from debt sales – and therefore not really reserves.
http://english.ahram.org.eg/NewsContent ... sales.aspx

In addition the Egyptian International Cooperation Minister Sahar Nasr flew at short notice and borrowed (possibly at the last moment) $US3 billion from the International Islamic Trade Finance Corporation to pay for imported food and other shopping. This strikes me as bizarre and a sign that there is a fire inside the house. Borrowing capital to pay food bills – really. An ex-World Bank economist (not a very good one) she is breaking all the rules of economics and accounting 4 years into the ‘highly successful’ reform program.

A local expert said this about the debt situation:

“Increasing foreign debt and cautioned that future generations would bear the burden of it. According to Nahas, (an economic advisor to a number of financial institutions) a sustainable solution to Egypt's economic crisis requires the government to develop its own financial resources — that is, industrial, agricultural and tourist projects to generate income — rather than continuing to borrow money. He warned that the government could plunge into crises due to its reliance on short-term debt instruments, such as bonds, some of which the government has only three months to settle.”

Seems pretty obvious but I’m sure the world’s best bankers, the best Cabinet and the best Army know better.

Abdel Fattah Professor of Economics at Cairo U said, “The problem is that most of the debt is aimed at financing the budget deficit, importing basic commodities and increasing the country’s cash reserves in a bid to improve Egypt’s credit rating, but a part of the debt must be allocated to national industrial, agricultural or tourist projects in order to secure and develop financial resources, dispense with borrowing and contribute to the repayment of debt.” https://www.arabfinance.com/en/news/det ... ies/425044

Maybe they will fill the cash hole with a rushed sale of public assets to an international market that won’t touch them or their mad sale of their banks where the new owner has to pay a new tax and pay it to Sisi himself for his personal spending pot – the Mada Masr Fund (board includes at least 2 Mubarak era crooks).

It is possible that the recent problem is that the new debt is for much longer maturities, which the market is not prepared to trust Egypt with. https://www.zawya.com/mena/en/story/Egy ... N1VQ1BUX2/

As I have read it the insurance taken out by debt buyers on Egyptian debt default a year ago on short maturity debt was extremely high. This suggests that insurance on long maturity debt would be less than astronomical but in that region.

This time round the UAE might help but relations with Saudi are poor and that might affect the preparedness of others. Of course the Chinese can chip in on their principle that ‘once you borrow I own you’ – as Sri Lanka has found out and others are realizing – Pacific Island States, Pakistan and soon Ethiopia which is in over its head. Maybe its bestie – North Korea can help. From Sisi’s point of view he must realize that if he gets himself in a credit/cash flow problem the EU and maybe even the US might extract concessions from him. Russia can’t help.

Wonder where the Gulf $US30 billion that was paid into the Army bank account ended up. https://www.bbc.com/news/blogs-trending-31301903

[Major Thom]

When you talk of corrupt debts in Cyprus you must be talking of the NPL's or Non performing loans that were given by the Banks almost 10 years ago, mainly mortgages that were offered in Swiss Francs at the time. A stupid thing to do knowing the Swiss Franc would always be powerful. Just recently a lot of the Banks including the Bank of Cyprus has sold on these NPL's to private companies, which will now cause even more problems because they are not so Leninist as the Banks. So there now stands the problem many will loose their homes when the company collects. Already the Government has stood in and told these companies they cannot sell above 80% of the today's price which is far lower than the price when people purchased them.

All this does not seem to put people off buying home though, it was reported that property is selling at around 20 per week in Paphos. Mainly to foreigners that are doing all the purchasing.

But it does not matter where you live corruption is rife, even in the UK and especially in the construction industry, where contracts are sold on and passed around the few large companies that are the only ones's large enough to do the work. Wholesalers visit sites with offers of Üse us solely and we will give a percentage of the purchases into your account. I was once offered a 500GBP Camera, a refrigerator, a cooker and other kitchen equipment to solely use this supplier. I know of a manager who had his bathroom done out in marble from the main site, in return for 2 electricians wiring out a block of apartments in his property folio, and these are just a couple of very small examples. How you will stop corruption I do not know because the world has changed, people have become more greedy, those with look down on those without. What can you do?

Nothing also seems to effect tourism to Cyprus even the corruption, on Saturday night we were sat on our patio and between 8.30pm and 10pm we counted 15 aircraft flying into Paphos

[Who2]

len.ɪ.nɪst/
someone who believes in the social, political, and economic principles and theories developed from Marxism by the Russian politician.....
Glad I cleared that up........

[Hafiz]

Maybe someone could stick to the topic rather than ramble off like a conversation in a geriatric nursing home.

The issue is how financially viable Egypt is. Add to this that after all the budget cuts and the new taxes on ordinary people its budget defect is still the highest in the world on the Economists list of 50 economies and several times higher than India, Indonesia and even wretched Pakistan. Saudi is panicking about its yearly defecit but its only 1/3rd of Egypt's.

I can't resist the chance to put on my football boots. I never mentioned corrupt debts only corrupt deals and an environment of corrupt advisors who organize them.

MT. Are you the only person in the world not to know that Cyprus banking and accounting and related professions have been sloshing Russian, drug and related dirty money into the European Banking system through this open back door for more than a decade. If you can bribe your money into a 'loose' Cyprus bank you are home and hosed and it will be in clean London in an hour. Do you know nothing about the broader environment in which you currently live in or would you have been a happy tourist in Germany in 1938?

The Russian mafia and Syria and North Korea have also been there for banking and corporate services and the FBI, but not the European regulator, has taken aggressive action against a few. Much of the Mubarak slosh passed through there for the above reasons and also their slack corporate registration system and discretionary taxes. One assumes that politicians, bureaucrats, police, corporate regulators but hopefully not judges have taken benefit from the fact that its a hole in the ground but with large amounts of money passing through.

Its starting to look like Malta is little better which must bring to 8 or 10 the number of British banking and tax stink holes in the world. Surely the number one business item at the next Commonwealth Heads of Government Meeting. Discussion would need to exclude the Head of the Commonwealth because she has taken advantage of this rort and her private bank Lazzards has done a deal of it - including for the Mubarak's.

In Cyprus the FBME Bank in Cyprus and the putrid Lebanese Saab brothers are only the start. Even the Cyprus newspapers cover it - although in less than coherent terms. https://cyprus-mail.com/2017/03/28/cypr ... ng-claims/

Cyprus is referred to 530,000 times in the Panama Papers (a small portion of all the dubious flows) as the location of companies/persons/advisors of tax rorters. I think that proves my point that its a major location for less than fragrant deals - and advisors.

[Major Thom]

That is the reason I do not have a Bank Account in Cyprus, its well know for money laundering and false accounts. That's why its not worth bothering about for banking.

[Hafiz]

Reuters suggests the debt/cash flow situation for Egypt is deteriorating. https://www.reuters.com/article/us-egyp ... SKCN1MB3LJ

Expect China to do what its done elsewhere, find the cash, following which it starts to dictate terms - ask Sri Lanka and others, although I'm far from sure that Egypt has anything China wants or needs - nor that Egypt has anything anyone else continues to want - other than it just gets down to business and make its society and economy work - somethings its tried and failed to do in 70 years..

[Dusak]

I was in my paint shop yesterday, unusually the girl in there was in a hurry to get me served and close up the shop, which was strange as it never closes during open hours, so I asked my friend what all the panic was about. She told her that the tax assessors were on their way to asses payable tax on each shop. Apparently they had a contact in the office that warned businesses that they were about to be hit. As soon as I had payed the shutters went down to join every other shuttered shop in the whole street. I've seen this happen before. How do they expect things to improve in their futures if they are not willing to pay their way? And no doubt who ever informs them about the tax men, gets a nice commission from each shop. Tax collections and corruption, two things that will never be resolved in Egypt.

[newcastle]

. Tax collections and corruption, two things that will never be resolved in Egypt.

Or anywhere else, for that matter

[Hafiz]

No One wants To Invest.

I think its getting close to a financial turning point at which stage expect Sisi’s mates to tap him on the shoulder whilst they put some cold metal up against his back.

There are some illusionists – often basing their views on personal experiences – who think the situation is improving – but they are no better than the anecdotes they use or the flags they drape themselves in. (where are those flag draper sisters who once proclaimed their loyalty for Sisi and what results for Luxor can they claim/).

A few years ago they were flogging themselves in the 5 star hotels of Luxor on fundraising - before their organizations were closed down by the government of Egypt for physical violence against vulnerable 'customers'. Where are these virtues of the Western World nowadays? Why aren't they named and cast out?

External investment other than oil is falling, is at the lowest level since 4 years ago and is entirely insufficient to create jobs and reduce the risk of another uprising. At the current quarterly rates its about 10% on a pro rata basis of places like India and the local banking system is so broken and incompetent and so starved of funds because of government demands for loans that it has little to fill this gap. https://www.reuters.com/article/us-egyp ... SKCN1ME28Q al Ahram ignores this story – probably because its unpatriotic and therefore a criminal offence to publish.

The apparent closing of the international debt markets to psychopathic Egyptian borrowing adds petrol to this fire because a lot of existing and maturing debt is very short term requiring new debt to repay the capital. The proposed idea sold to them by some Dutch dodgy’s to do a beauty pageant for new debt in the East seems doomed before it starts. Markets can smell desperation from 15,000 miles away as the UK government has worked out trying to do post-Brexit trade deals. Everyone waits for the death rattle before showing their money.

Given this general picture the proposed sale/trade sale of government assets looks far from good and was never going to be much good because no one wants to risk a billion or two in Egypt. A stock float might have been smarter but who ever accused the Central Bank of Egypt of the smarts? Still the local crooks will get a new round of cheap buys whilst the taxpayer is ‘told’ it’s a ‘historic and successful’ set of fire sales.

Where all the gifts and loans of the past 4 years have gone is interesting. Generally on crazy ego projects that don’t create industries or businesses and the local private sector just sticks, like a heroin addict, to its ways in building cities and towns that do little for the future and are full of vacancies (Estimated by experts to between 20-40%). The money has been spent on projects calculated to win popular approval. It hasn’t done that its just created things people don’t need. (some technical analysis of the Canal development say that there were much cheaper engineering options including better management and that going for ‘big’ made no sense. $US20 billion down the toilet).

The Army’s huge growth in the private sector in the last few years is ‘littered’ with successes – identity of the firms and accounts are a state secret but astoundingly good. If the economy isn’t any good its not the Army to blame it’s the Jews, perverts and international conspiracies.

As usual the problem isn’t lack of gifts, loans or investments its that the system is rotten and led by rotten people and much in the past 40 years has been putting fresh petrol into a car tank full of holes. At this stage I’d give it 6-12 months before it gets interesting and the Egyptian approach is always to leave ‘solution’ until midnight – usually 1 minute after, sometimes 20 minutes after.

The local Supreme Financiers are idiots. This is what the lead economist at EFG-Hermes (once half owned by Mubarak, putrid and should be subject to criminal proceedings):

“Domestic consumption has been low,” said Mohamed Abu Basha, an economist at Egyptian investment bank EFG Hermes. “Now there is no urgency to deploy capital.”

Idiot. He’s just thinking of the domestic market – full of people with little money – and not the export market which is the only way poor countries get out of the circle. If Egypt has a future it will be in high labor manufacturing for the international market and this will require western capital and lots of western management. A proper western banker would fire this dumb creature.

These voracious idiots think only of how the Egyptian public assets can be stolen/purchased on improper terms rather than the obvious of how capital and enterprise can grow the economy.

In terms of the near future the coarse flogging of public assets will attract the putrid EFG Hermes to buy some taxpayers cheapies in the next few months whilst several of their partners/owners/founders/frequent names in the Panama Papers/trustees of Mubarak family money/regular bankers in Cyprus face criminal charges for the float/stock manipulation of the Bank Misr Mubarak mess. Its disgraceful that Reuters speaks to these people. They are human trash who, only in Egypt, are not in jail,

[Hafiz]

Stupid Asians or Not

Given its debt and cash crisis the Supreme Economists of Egypt are currently doing a roadshow in Asia to test the waters on selling debt because the EU and US markets have already made up their minds and torpedoed three sovereign debt raisings in the last 3 months. Egypt has hired some Dutch 3 ½ star advisors – maybe the 5 star advisors want to stay away – even the smelly HSBC that saved them 2 years ago.

That the currency has been solid for the last 3 months whilst Egyptian and world economic news is negative proves its manipulated by the Central Bank so they are probably loosing a lot of money. During that time there has been a $US12 billion dumping of old Egyptian debt by westerners.

Asians aren’t as foolish as some and most will run a mile. The Chinese on the other hand like a desperate borrower because that gives them an opportunity to extort lots of economic and political benefits. Their ruthless track record on this is emerging fast in countries drunk on their debt. Because the Chinese aren’t signatories to the international conventions and Club of Rome the debt deals they do are secret, the interest is secret as are the default consequences. Also because they aren’t a member of these rules systems, as most others are, rescheduling and debt forgiveness is out of the question.

When you default on a Chinese loan its like the 1880’s in Egypt all over again in terms of directions, control and seizure of state assets. Sri Lanka has learnt this and Bangladesh, a number of Pacific Islands, Ethiopia and Pakistan will have to face some tough choices soon and Trump won’t save them. Australia has recently assumed the debt responsibilities for a few feckless island states and I’m sure PNG will come bleating soon. Most have found what Egypt has yet to learn. If debt is to be repaid it needs to be put into highly profitable industries, preferably export industries, not a new capital city or a dud of a canal extension – maybe as much as $US50 billion for these two dullard ideas.

The Jap Banks and Insurance companies, some of the largest in the world, probably won’t be buying debt after Nomura, one of the most respected financial companies in the world, rated Egypt 5th worst in the world for an exchange rate crisis. Turkey is slightly less risky. Vietnam and India are hugely safer. The situation is now worse than when Nomura did its assessment.

If the currency dives paying back existing international debt will be much harder, overseas banks will want more interest for new debt, inflation will peak and civil disturbance become more likely. Marie Antoinette’s head learnt that revolution doesn’t occur at the point of greatest suffering but when you have later raised expectations only to dash them – again.



https://www.ft.com/content/bcfa7bf0-b4a ... d7de085ffe

The Egyptian newspapers didn’t run the Nomura story. Wonder why? Getting people to respect and like you usually involves a lot of lies.

The Supreme Investresses, Sahar Nasr, who like all the others lies/inflates her CV, thinks these Chinese risks are absolutely wrong and that all evidence of risk is fabricated – probably by Jews. As is usual there is no objective reality in Egypt – just theater to prop up the T-Model economic and political system. That she felt the need to publically dismiss risk shows she has been warned. http://english.ahram.org.eg/NewsContent ... ached.aspx

The running of a 3 month old story in al Ahram the last few days that the IMF thinks things good in Egypt shows they are grabbing at any mascara they can find out of the old/used cupboard. The IMF always thinks its projects perfect – but no one else does.

[Major Thom]

The IMF are just people with pumped up chests creating more havoc than good!!