Event

Egypt is preparing for its first presidential elections since the fall of Mubarak’s regime in February of last year. The first round will be held on 23 and 24 May, with a possible run-off scheduled one month later. The run-up to these elections has so far proven to be controversial. After the exclusion of several presidential candidates, a final list of 13 candidates has been withheld  by  the  electoral  commission.  Among  those  disqualified,  three  were  high-profile candidates: al-Shater, the Muslim Brotherhood’s favoured candidate, Suleiman, intelligence chief under Mubarak (both submitted their candidature last minute), and Abu Ismail, a conservative Salafist preacher. Last month, an Egyptian court also suspended the committee charged with setting up a new constitution, because it was being criticised and boycotted by several Egyptian parties and groups for including too many Islamist members. As a consequence, the presidential campaign has started without anyone knowing the exact powers of the eventual President.

Impact on country risk

Political uncertainty and its concomitant instability are likely to continue, at least until the transfer of power by the Supreme Council of the Armed Forces (SCAF) to an elected government takes place (scheduled for end June), as  it remains yet unclear which government will be formed and under which conditions the SCAF will hand over power. As a consequence, downward pressure on foreign exchange reserves is expected to continue, albeit currently at a slower rate. Reserves now cover less than three months of imports of goods and services due to lower tourism revenues and foreign direct investment in the country, and a withdrawal of portfolio investment. An agreement with the IMF on a USD 3.2 billion loan could help to restore confidence in the economy. However, given the currently tense political atmosphere, a domestic political consensus on such an agreement seems unlikely before a new President takes office.

Analyst: The Risk Management Team, r.cecchi@credendogroup.com