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Many fingers are pointed at the massive construction & development projects that are currently being undertaken by zealous investors. These projects are being blamed as the primary cause that is
draining cash from both banks & the government.
Others argue that revenues from the gulf have decreased as the demand for Egyptian workers has greatly declined in recent years, in some occupations more than others.
Moreover, those who do secure a job in Gulf states generally receive less lucrative salaries than are expected and are less likely to receive generous incentives or raises. One bank executive stated that at one time eight employees
handled foreign cash transactions at his branch; today, he says, their number has decreased to just three. Which means that less money is being transferred from abroad to Egypt, this could be further related to the current
performance of the Egyptian pound against, say, the US Dollar.
Regardless of the cause, one thing is sure, there IS a Cash Flow Problem. An important indicator that there is a problem is the interbank interest rate; this is
the rate that banks charge other banks for short term cash loans (Banks lend each other too). In recent years the interbank interest rate was less than half the rate that banks charged for corporate & personal loans, Today, the
rates are virtually the same.
For any of the above factors to cause the cash flow problem they must contribute to or create a "Negative Cash Flow", i.e. more money going out of the country than coming in.
Recently, lots of money has been spent on foreign goods such as mobile phones, networks, computer components and software and in effect less money has been spent internally.
Could the Export-Import balance be a significant
cause? Would increasing exports or decreasing imports cause a reversal? Would that be easy to do? Is collecting overdue debts and taxes a solution? The problem is too complex for one action to be a solution, there has to be an
integrated approach to the problem, starting with a clear-cut definition of what the problem really is, in both context and size.
By identifying the problem correctly steps could then be taken toward an integrated solution.
When this will happen is unknown as currently the context of problem is rather unstable, with a lot of changes taking place in the economic and decision-making arenas. When things settle down, which will be soon, this crisis will
be merely the step back that an athlete takes before making a great jump. |
