Higher costs for import financing to fuel and insurance, are offsetting gains from recent drop in the Egyptian pound this year amid the worst slide in foreign reserves in at least 15 years. The country’s credit risk has surged the most in the world after Argentina in 2013, according to data compiled by Bloomberg, as violence, political unrest and a currency crisis shattered the initial optimism that followed the June election of President Mohamed Mursi.
““As an exporter I am in a better shape, but you can’t be happy in your apartment if the building is not fine,” Khalifa said, chief investment officer at Al Arafa Investments & Consulting, which counts Zara and Banana Republic among it clients. “If the country doesn’t start to show signs of recovery, all manufacturers will come under pressure and at risk of losing customers.” ..The cost of insuring Egypt’s dollar-denominated debt against default for five years has jumped 188 basis points, or 1.88 percentage points, this year to 698 yesterday, data compiled by Bloomberg show. The government’s local-currency borrowing costs for one year climbed 78 basis points in the last debt sale to almost 14.5 percent, the highest since September, according to central bank data on Bloomberg. The most-populous Arab country, which imports fuel and wheat, is rated Caa1 at Moody’s, the fifth-lowest junk score. The nation is rated B- at S&P. .
“The central bank started to limit dollar funding to banks at the end of December to conserve dwindling reserves, which have plunged more than 60 percent since the uprising to $13.5 billion in February, enough to cover less than three months of imports.  .
“The dollar shortage has led to the emergence of an unregulated currency markets where the gap with the official exchange rate is as wide as 17 percent, according to a dealer in Cairo who asked not to be named because his trade is illegal. The crisis has forced some companies, such as carpets exporter Oriental Weavers to switch part of their debt into pounds, paying higher interest rates. Oriental Weavers shares dropped 22 percent last year. Al Arafa’s dollar-denominated shares have slumped 21 percent in 2013, compared with a 10 percent slide in the index. …