

Currently released so far... 12553 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
2011/05/01
2011/05/02
2011/05/03
2011/05/04
2011/05/05
2011/05/06
2011/05/07
2011/05/08
2011/05/09
2011/05/10
2011/05/11
2011/05/12
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy Niamey
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sapporo
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
APECO
ASEC
AMGT
AFIN
APER
ACABQ
AORC
AEMR
AF
AE
AR
AGMT
AU
AY
ABLD
AS
AG
AJ
APCS
AX
AM
AMEX
ATRN
ADM
AMED
AFGHANISTAN
AZ
AL
ASUP
AND
ARM
ASEAN
AFFAIRS
AQ
ATFN
AMBASSADOR
AODE
APEC
ACBAQ
AFSI
AFSN
AO
ABUD
AC
ADPM
ADCO
ASIG
ARF
AUC
ASEX
AGAO
AA
AER
AVERY
AGRICULTURE
AIT
AADP
ASCH
AORL
AROC
ACOA
ANET
AID
AMCHAMS
AINF
AMG
AFU
AN
ALOW
ASECKFRDCVISKIRFPHUMSMIGEG
ACS
ADANA
AECL
ACAO
AORG
AGR
BEXP
BR
BM
BG
BL
BA
BTIO
BO
BP
BC
BILAT
BK
BU
BD
BRUSSELS
BB
BF
BBSR
BIDEN
BX
BE
BH
BT
BY
BMGT
BWC
BTIU
BN
CA
CASC
CFED
CO
CH
CS
CU
CE
CI
CM
CMGT
CJAN
COM
CG
CIS
CVIS
CR
CKGR
CHR
CVR
COUNTER
CIA
CLINTON
CY
CPAS
CD
CBW
COUNTERTERRORISM
CITEL
CDG
CW
CODEL
COUNTRY
CLEARANCE
COE
CN
CARICOM
CB
CONDOLEEZZA
CWC
CACS
CSW
CIDA
CIC
CITT
CONS
CL
CACM
CDB
CDC
CAN
CF
CJUS
CTM
CBSA
CARSON
CT
CLMT
CBC
CEUDA
CV
COPUOS
CTR
CROS
CAPC
CAC
CNARC
CICTE
CBE
ECON
ETRD
EIND
ENRG
EC
ELAB
EAGR
EAID
EFIS
EFIN
EINV
EUN
EG
EPET
EAIR
EU
ELTN
EWWT
ECIN
ERD
EI
ETTC
EUR
EN
EZ
ETC
ENVI
EMIN
ET
ENVR
ER
ECPS
EINT
EAP
ES
ENIV
ECONOMY
EXTERNAL
EINN
EFTA
ECONOMIC
EPA
EXBS
ECA
ELN
ETRDEINVECINPGOVCS
ENGR
ECUN
ENGY
ECONOMICS
ELECTIONS
EIAR
EINDETRD
EREL
EUC
ECONEFIN
EURN
EDU
ETRDEINVTINTCS
ECIP
ENERG
EFIM
EAIDS
EK
ETRDECONWTOCS
EINVETC
ECONCS
EUNCH
ESA
ECINECONCS
EUREM
ESENV
EFINECONCS
ETRC
ENNP
EAIG
EXIM
EEPET
EINVECONSENVCSJA
EUMEM
ETRA
ERNG
ETRO
ETRN
EINVEFIN
ICTY
IN
IS
IR
IC
IZ
IA
INTERPOL
IAEA
IT
IMO
IO
IV
ID
IRAQI
IEA
INRB
IL
IWC
ITU
ICAO
ISRAELI
ICRC
IIP
IMF
IBRD
ISLAMISTS
ITALY
ITALIAN
ILO
IPR
IQ
IRS
IAHRC
IZPREL
IRAJ
IDP
ILC
ITF
ICJ
IF
ITPHUM
INMARSAT
ISRAEL
IACI
IBET
ITRA
INR
IRC
IDA
ICTR
IGAD
INRA
INRO
IEFIN
INTELSAT
INTERNAL
INDO
ITPGOV
KWMN
KSCA
KDEM
KTFN
KIPR
KCRM
KPAL
KE
KPAO
KPKO
KS
KN
KISL
KFRD
KJUS
KIRF
KFLO
KG
KTIP
KTER
KRCM
KTIA
KGHG
KIRC
KU
KPRP
KMCA
KMPI
KSEO
KNNP
KZ
KNEI
KCOR
KOMC
KCFC
KSTC
KMDR
KFLU
KSAF
KSEP
KSAC
KR
KGIC
KSUM
KWBG
KCIP
KDRG
KOLY
KAWC
KCHG
KHDP
KRVC
KBIO
KAWK
KGCC
KHLS
KBCT
KPLS
KREL
KCFE
KMFO
KV
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KFTFN
KVPR
KTDB
KSPR
KIDE
KVRP
KTEX
KBTR
KTRD
KICC
KCOM
KO
KLIG
KDEMAF
KMRS
KRAD
KOCI
KSTH
KUNR
KNSD
KGIT
KFSC
KHIV
KPAI
KICA
KACT
KHUM
KREC
KSEC
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KCMR
KPIN
KESS
KDEV
KNAR
KNUC
KPWR
KENV
KWWMN
KWMNCS
KPRV
KOM
KBTS
KCRS
KNPP
KWNM
KRFD
KVIR
KTBT
KAID
KRIM
KDDG
KRGY
KHSA
KWMM
KMOC
KSCI
KPAK
KX
KPAONZ
KCGC
KID
KPOA
KIFR
KFIN
KWAC
KOMS
KCRCM
KNUP
KMIG
KNNPMNUC
KERG
KTLA
KCSY
KJUST
MOPS
MARR
MASS
MNUC
MX
MCAP
MO
MR
MI
MD
MK
MA
MP
MY
MTCRE
MOPPS
MASC
MIL
MTS
MLS
MILI
MAR
MU
MEPN
MAPP
MTCR
MEPI
MZ
MEETINGS
MG
MW
MAS
MT
MCC
MIK
ML
MARAD
MV
MERCOSUR
MTRE
MPOS
MEPP
MILITARY
MDC
MQADHAFI
MUCN
MRCRE
MAPS
MEDIA
MASSMNUC
MC
NZ
NZUS
NL
NU
NATO
NP
NO
NIPP
NE
NH
NR
NA
NPT
NI
NSF
NG
NSG
NAFTA
NC
NDP
NEW
NRR
NATIONAL
NT
NS
NASA
NAR
NV
NORAD
NSSP
NK
NPA
NGO
NSC
NATOPREL
NW
NPG
NSFO
OPDC
OTRA
OIIP
OREP
OVIP
OSCE
OEXC
OIE
OPRC
OAS
OPIC
OTR
OMIG
OSAC
OFFICIALS
OECD
OSCI
OBSP
OFDA
OPCW
ODIP
OFDP
OES
OPAD
OCII
OHUM
OVP
ON
OIC
OCS
PHUM
PREL
PGOV
PINR
PTER
PARM
PREF
PM
PE
PINS
PK
PHSA
PBTS
PRGOV
PA
PORG
PP
PS
PGOF
PL
PO
PARMS
PKFK
PSOE
PEPR
PAK
POL
PPA
PINT
PMAR
PRELP
PREFA
PALESTINIAN
PBIO
PINF
PNG
PMIL
PFOR
PUNE
PGOVLO
PAO
POLITICS
PHUMBA
PSEPC
PTBS
PCUL
PROP
PNAT
PNR
POLINT
PGOVE
PROG
PHALANAGE
PARTY
PDEM
PECON
PROV
PHUMPREL
PGOC
PY
PCI
PLN
PDOV
PREO
PGIV
PHUH
PAS
PU
POGOV
PF
PINL
POV
PAHO
PRL
PG
PRAM
POLITICAL
PARTIES
POLICY
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PGGV
PHUS
PSA
PHUMPGOV
PEL
PSI
PAIGH
POSTS
PBT
PTERE
RS
RU
RW
RM
RO
RP
REGION
RSP
RF
RICE
RCMP
RFE
RIGHTS
RIGHTSPOLMIL
ROBERT
RUPREL
RELATIONS
ROOD
REACTION
RSO
REPORT
SENV
SNAR
SCUL
SR
SC
SOCI
SMIG
SI
SP
SU
SO
SW
SY
SA
SZ
SAN
SF
SN
STEINBERG
SG
ST
SIPDIS
SNARIZ
SNARN
SSA
SK
SPCVIS
SOFA
SAARC
SL
SEVN
SARS
SIPRS
SHUM
SANC
SWE
SHI
SYR
SNARCS
SPCE
SYRIA
SEN
SH
SCRS
SENVKGHG
TRGY
TSPL
TPHY
TSPA
TBIO
TI
TW
THPY
TX
TU
TS
TZ
TC
TH
TT
TIP
TO
TERRORISM
TRSY
TINT
TN
TURKEY
TBID
TL
TV
TNGD
TD
TF
TP
TFIN
TAGS
TK
TR
UNSC
UK
UNGA
UN
US
UNHRC
UG
UP
UNMIK
UNHCR
UE
USTR
UNVIE
UAE
UZ
UY
UNO
UNESCO
USEU
USOAS
UV
UNODC
UNCHS
UNFICYP
UNEP
UNIDROIT
UNDESCO
UNDP
UNPUOS
UNC
UNAUS
USUN
UNCHC
UNCHR
UNCND
UNICEF
UNCSD
UNDC
USNC
USPS
USAID
Browse by classification
Community resources
courage is contagious
Viewing cable 08CAIRO2221, IS THE EGYPTIAN GOVERNMENT READY FOR A GLOBAL SLOWDOWN? Sensitive but unclassified. Please handle accordingly.
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #08CAIRO2221.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
08CAIRO2221 | 2008-10-20 10:58 | 2011-02-16 21:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Cairo |
VZCZCXYZ0000
RR RUEHWEB
DE RUEHEG #2221/01 2941058
ZNR UUUUU ZZH
R 201058Z OCT 08
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 0676
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0423
UNCLAS CAIRO 002221
SIPDIS
SENSITIVE
STATE FOR NEA/ELA, NEA/RA
USAID FOR ANE/MEA MCCLOUD AND RILEY
USTR FOR FRANCESKI
TREASURY FOR PARODI AND BAYLIN
COMMERCE FOR 4520/ITA/ANESA
E.O. 12958: N/A
TAGS: ECON EFIN EINV PGOV EG
SUBJECT: IS THE EGYPTIAN GOVERNMENT READY FOR A GLOBAL SLOWDOWN? Sensitive but unclassified. Please handle accordingly.
1.(SBU) Summary: Egypt's stock market, like nearly all globally, has been significantly down this year and the global financial crisis has only accelerated that decline. The index is down 50 percent from its April historic highs, and in October, the most intense period of global financial crisis, the local index shed more than 20 percent of its value. That said, just a small percentage of Egyptians are invested in the stock market, Egyptian banks are very conservative, and Egypt enters this volatile period with strong growth, so Egypt's real economy has seen relatively little specific impacts from the financial crisis. However, the Government would probably like to believe that it is more immune than it is. President Mubarak has held two Cabinet meetings with his economic team recently, and several members of the economic team have spoken publicly about planned reforms and other initiatives to ease the economic impact of ongoing financial turmoil, including an October 12 press conference by Prime Minister Nazif and an October 19 speech at the AmCham by Minister of Trade Rachid. The message has been that Egypt's financial system is safe, that the GOE is monitoring the situation, and that even in a global recession Egypt will weather the storm better than others. While we are not aware of any comprehensive assessments done by the GOE on the specific risks Egypt faces in this global crisis, some ministers have mentioned some "new plans" and "incentives" in the press, none of which contain specificity. End Summary.
¶2. (U) At a speech to the Amcham on October 16, Minister of Trade and Industry Rachid warned that although the Egyptian banking sector is sound, Egypt is nonetheless likely to suffer from the global economic crisis that he predicted would inevitably follow the current period of financial turmoil. Following the lines of the IMF's World Economic Outlook he said, that as OECD countries slow, growth in 2009 will come from emerging markets, including China, India, Indonesia and Egypt. He expressed concern, however, that a protectionist trend may emerge and said that WTO's Lamy had called him about an emergency meeting. The financial crisis, he said, is a "hurricane that must pass" but noted that it would create opportunities for some companies and countries. On the positive side, for Egypt, the drop in commodity prices would lead to a drop in inflation, which, at 20-plus percent year-on-year, has been one of Egypt's biggest economic concerns.
¶3. (U) In the case of Egypt's banking sector, which Central Bank Governor El Okdah publicly described last week as "highly liquid," Rachid observed deposits are safe and lending continues. This stability has meant that the GOE's economic team has been able to focus on the looming economic slowdown which Rachid predicted would affect Egypt's exports, and other significant sources of forex, including tourism, foreign direct investment, remittances and Suez Canal revenues. Egypt has been spared the financial crisis, he said, noting that the GOE now needs to be forward thinking on sectoral initiatives to "at least minimize the damage" if not take "full opportunity of the disruption."
¶4. (U) Rachid said that under current economic conditions, the appropriate policy response in Egypt is "a higher level of engagement" on economic reform. To continue at the same pace, he said, would be to lose ground and see GDP growth rates fall to 3-5 percent. Egypt needs 7 percent GDP growth to control unemployment and address poverty. His goal, he said, is full manufacturing utilization rates, no layoffs, and completion of the 1000 factories now under construction. To meet these goals, he said, the GOE will design a set of reforms and measures for every sector, with an overall strategy of: ensuring adequate access to finance, continuing to attract private investment, including by Egyptians, and maintaining the government's infrastructure investment program. This will include pushing Egyptian banks to increase their lending activities. He also suggested that he will engage more actively with emerging markets such as Turkey and China, and maintain trade and investment flows with India and Africa.
5.(SBU) Rachid's remarks followed an October 12 press conference by Prime Minister Nazif, Central Bank Governor El Okdah and Minister of Investment Mohieldin in which they recited many of the statistics which indicate Egypt's financial stability and safety. El Okdah reviewed the strong position of the Egyptian financial system, in part due to reforms begun in 2004; noting that net international reserves (NIR) are safe and are in Treasury bonds in safe countries; the NIR is diversified; Egyptian banks have a relatively small amount invested overseas; and loan-to-deposit ratios are much lower in Egypt than in other countries.
¶6. (SBU) All of these things are true. Egypt has been relatively slow to introduce new financial products, which in the current environment, makes them appear wise. Also, the CBE's bank reform program of the last few years has contributed to the improved asset quality and the more cautious approach towards lending of most banks. While this has led to low credit availability and a slow credit growth, it leaves the banks in good stead in this environment. However, while starting from a very low base, the last several years have seen growth in some new financial instruments like mortgages, credit cards, and consumer credit. While this type of credit is still a relatively small portion of overall credit, and it is primarily concentrated in a small handful of banks, some analysts are already warning that given the lack of familiarity with a credit culture and absent better financial literacy, that even this small amount of new credit could begin to pose some system risks.
7.(U) In the period between the Nazif press conference and the Rachid speech, several sectoral ministers hinted at the kind of reforms the GOE may be contemplating. Transport Minister Mansour, for example, hopes to attract more investment in ports and road projects. Housing Minister Al Mahgrabi said a new plan will be announced to boost activity in the building materials sector. In addition to announcing delays in removing energy and other subsidies in the industrial zones, and eliminating the export tax on cement, Rachid has said that Egypt's Export Guarantee Company will receive additional capital. He also said new incentives could be offered to license industrial projects, and credit for industrial projects could be enhanced. Rachid told the Ambassador on the margins of the Amcham speech that he hoped to use the urgency of the crisis to accelerate additional economic reform.
¶8. (SBU) Additionally, the Ministry of Investment (MOI) will use financial crisis to push implementation of an existing plan to create a single regulator for the Capital Markets Authority, the Mortgage Finance Authority and the Insurance Authority. MOI has been working on this key reform measure for some time. Mohieldin told us over the weekend that the ministry will cite the financial crisis when it submits the draft single regulator law to parliament in November. According to the minister's advisor, MOI will argue that the draft law is a key part of the GOE's response to the financial crisis, and ask parliament to pass the law expeditiously. MOI is targeting January 1 for passage of the new law, but the minister's advisor said it could possibly happen by the end of November.
9.(SBU) Comment: There are few specifics of any of the "new proposals" being discussed, and given an absence of analysis about how slower global growth will affect Egypt, it is hard to know exactly where Egypt should focus any "new efforts." Clearly Egypt's economy is linked to external developments, so reductions in tourism, Suez Canal receipts, and foreign direct investment could all contribute to slower growth. Clogged credit markets have reportedly already started affecting exporters who depend on letters of credit in order to ship goods. Anecdotally, we have heard bankers mention that the L/C market has been affected, something that will impact Egypt's export-dependent growth strategy. That said, Egypt has a large domestic demand, an increasingly diversified manufacturing base, a huge government sector which continues to employ huge masses, so even if growth drops off, it will still be above historical norms. And, while oil prices are falling, and Gulf countries may have less to invest, they still are relatively well off to continue to invest in Egypt.
10.(SBU) Comment (cont): Egypt's reformers have been riding a wave of global praise in recent years, so in some ways may think of themselves as infallible. Global financial crisis or not, the economic team needs to redouble its efforts to keep Egyptian growth at a high and sustainable level and to fix the inequitable growth which has worsened with years of inefficient subsidies. While subsidy reform was a part of Mubarak's lexicon after last year's NDP party conference, it has disappeared in the current environment; Rachid refused to answer a question at the AmCham on removing subsidies. Given the declining cost of commodities and lack of political will to take on tough reforms, we expect that the GOE will continue to use subsidies as its principal way to help the poor. While this may help with public perceptions, it ignores long-awaited reforms needed for long-term economic growth in the areas of the education, land ownership, housing, the civil service and the welfare system. It is worth noting that Finance Minister Boutros-Ghali has not yet weighed in publicly. It will be interesting to see if any "incentives" which are rolled out run counter to his goal of fighting the deficit. SCOBEY