Failed treasury auction portends Egyptian disaster

Investors bought less an a third of the 3.5 billion Egyptian pounds (US$580 million) worth of Treasury bills offered to the market on January 22, a red flag warning that Egypt's foreign exchange position is close to the brink.

Yields on Egyptian government debt maturing in nine months jumped to nearly 16%, but the government could not place its local-currency debt to Egyptian investors, even at that exorbitant rate.

This is a new and ominous decline in the financial position of the most populous Arab country. I have been warning since last May that "Egypt is running out of food, and, more gradually, running

out of the money with which to buy it." How fast this may occur is hard to specify, but the government's inability to borrow on money markets suggests that the crunch is not far off. (See The hunger to come in Egypt Asia Times Online, May 10, 2011.)


Interest rate on Egyptian 9-month treasury bills

Source: Bloomberg

Egypt faces a disaster of biblical proportions, and the world will do nothing about it. Officially, Egypt's foreign exchange reserves fell by half during 2011, including a $2.4 billion decline during December - from $36 billion to $18 billion, or about four months of imports. (more)