CAIRO: Egypt would like European Union states to cancel its debts to them but has not made a formal request, the EU’s local delegation said, as Egypt’s economy showed signs of recovery from weeks of political turmoil.
The government has slashed its growth forecast after 18 days of street protests across the country unseated President Hosni Mubarak, scaring off tourists, hitting inward investment and sparking a wave of strikes in banks, industry and government.
The economy was worth an estimated $217 billion last year and it relies heavily on foreign investment, tourism and fees from the Suez Canal. A government statistics agency estimates the uprising cost the economy at least $1.7 billion.
A spokeswoman for the European Union delegation in Cairo said European Union Ambassador Marc Franco met Finance Minister Samir Radwan on Sunday and the two discussed Egypt’s finances.
"The cancellation of debts was mentioned as something that Egypt would like to see, but there was no formal request," the spokeswoman said.
Business leaders said the reopening of banks on Sunday had led to a big improvement in sentiment. Industrial firms now able to pay their suppliers and sell to their own customers had started resuming normal production, though demand remained weak.
"Now we are waiting for the market to increase demand," said Mohamed Said Hanfy, General Manager of Egypt’s Chamber of Metallurgical Industries.
He said that, if things continue to improve at the same pace, industry should be back to normal in about a week.
"Employees are working now without a problem. It is just a gradual start-up, but it is going well," said Hanfy.
With embassy travel warnings still in place, fears remain for Egypt’s tourism industry, a top employer which accounts for over a tenth of gross domestic product, and for investment.
There are few signs of foreign firms canceling longer-term projects in the country, but the full hit to portfolio inflows will remain unclear until the stock market reopens.
Its benchmark index, EGX30, slid 6.1 percent on Jan 26 and 10.5 percent the next day before the market shut as the anti-government protests spread.
Market officials say the Egyptian stock exchange will reopen only once they are sure banks are functioning properly.
In a statement released on Tuesday, the Egyptian stock exchange said it will remain shut until next week.
"By today or tomorrow, we might know the initial date for the re-opening," said Hicham Turk, an exchange spokesman.
The International Monetary Fund said last week it was hard to know how quickly Egypt’s economy would recover because it depended on when tourism and investment can rebound.
Ratings agencies downgraded Egypt’s sovereign debt ratings by one notch as the protests intensified, citing possible damage to already weak state finances.
Finance Minister Radwan has told Reuters the unrest would cut tax revenue and had prompted the government to raise its budget deficit forecast for 2010/11 to 8.2-8.4 percent of gross domestic product from 7.9 percent before the crisis.
Egypt had a deficit of 8.3 percent in 2009/10.
