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Egypt's economic challenges remain

Friday, July 05, 2013 - 02:12

July 5 - The ousting of Egypt's president Mohamed Mursi leaves behind many familiar economic problems - which don't look likely to be solved anytime soon. Kirsty Basset reports.

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Egypt's President Mohamed Mursi may be gone - but the country's economic troubles remain. Markets rallied 7 percent on Thursday - but Mursi's departure isn't likely to lead to any quick fixes for the country's ballooning budget deficit and high unemployment. Dina Ahmad is a strategist at BNP Paribas. (SOUNDBITE)(ENGLISH) DINA AHMAD, CENTRAL AND EASTERN EUROPE, MIDDLE EAST AND AFRICA STRATEGIST AT BNP PARIBAS SAYING: "Regardless of the change in leadership, the economic situation in Egypt still remains very, very poor. No matter what new leadership comes into power, they still face the same challenges that President Mursi faced in terms of having to cut subsidies, having to hike taxes, having to weaken the currency further, so I think it's premature to be buying Egyptian assets at this stage." Mursi was widely blamed for the state of Egypt's economy. Food and fuel shortages have been common in recent weeks. The government has been running out of cash - partly because of expensive subsidies for gas and other fuels, which eat up over a fifth of state spending. Ahmad says that may have to change. (SOUNDBITE)(ENGLISH) DINA AHMAD, CENTRAL AND EASTERN EUROPE, MIDDLE EAST AND AFRICA STRATEGIST AT BNP PARIBAS SAYING: "They're going to have to reduce subsidies, and this is a very unpopular measure obviously. But if they don't do this, their budget deficit is expanding at unsustainable rates." Egypt had been in talks with the IMF to secure a $4.8 billion emergency loan - but negotiations stalled over resistance to austerity measures. Now analysts say any loan is likely to be further delayed. (SOUNDBITE)(ENGLISH) DINA AHMAD, CENTRAL AND EASTERN EUROPE, MIDDLE EAST AND AFRICA STRATEGIST AT BNP PARIBAS SAYING: "With the army at the moment in power, I think that it's very unlikely that the IMF will be able to agree a deal. I think there needs to be some kind of stabilisation with regards to the transition and also some sort of timeline with regards to elections. But most importantly I think the IMF needs to see what the composition of the new government will look like, and also what their fiscal plans will be, because the package will not be unconditional." There may be other sources of financial aid though - Saudi Arabia and the UAE may be more likely to give to Egypt, now that the Muslim Brotherhood is no longer on the scene.

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Egypt's economic challenges remain

Friday, July 05, 2013 - 02:12