Keep Us Strong WikiLeaks logo

Currently released so far... 97115 / 251,287

Articles

Browse latest releases

Browse by creation date

Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z

Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
ETRD EAGR ETTC EAID ECON EFIN ECIN EINV ELAB EAIR ENRG EPET EWWT ECPS EIND EMIN ELTN EC ETMIN EUC EZ ET ELECTIONS ENVR EU EUN EG EINT ER ECONOMICS ES EMS ENIV EEB EN ECE ECOSOC EK ENVIRONMENT EFIS EI EWT ENGRD ECPSN EXIM EIAD ERIN ECPC EDEV ENGY ECTRD EPA ESTH ECCT EINVECON ENGR ERTD EUR EAP EWWC ELTD EL EXIMOPIC EXTERNAL ETRDEC ESCAP ECO EGAD ELNT ECONOMIC ENV ETRN EIAR EUMEM ENRGPARMOTRASENVKGHGPGOVECONTSPLEAID EREL ECOM ECONETRDEAGRJA ETCC ETRG ECONOMY EMED ETR ENERG EITC EFINOECD EURM EENG ERA EXPORT ENRD ECONEINVETRDEFINELABETRDKTDBPGOVOPIC EGEN EBRD EVIN ETRAD ECOWAS EFTA ECONETRDBESPAR EGOVSY EPIN EID ECONENRG EDRC ESENV ETT EB ENER ELTNSNAR ECHEVARRIA ETRC EPIT EDUC ESA EFI ENRGY ESCI EE EAIDXMXAXBXFFR EETC ECIP EIAID EIVN EBEXP ESTN EING EGOV ETRA EPETEIND ELAN ETRDGK EAIDRW ETRDEINVECINPGOVCS EPEC ENVI ELN EAG EPCS EPRT EPTED ETRB EUM EAIDS EFIC EFINECONEAIDUNGAGM EAIDAR ESF EIDN ELAM EDU EV EAIDAF ECN EDA EXBS EINTECPS ENRGTRGYETRDBEXPBTIOSZ EPREL EAC EINVEFIN ETA EAGER EINDIR ECA ECLAC ELAP EITI EUCOM ECONEFINETRDPGOVEAGRPTERKTFNKCRMEAID EARG ELDIN EINVKSCA ENNP EFINECONCS EFINTS ECCP ETC EAIRASECCASCID EINN ETRP EAIDNI EFQ ECOQKPKO EGPHUM EBUD ECONEINVEFINPGOVIZ ENERGY ELB EINDETRD EMI ECONEFIN EIB EURN ETRDEINVTINTCS EIN EFIM ETIO ELAINE EMN EATO EWTR EIPR EINVETC ETTD ETDR EIQ ECONCS EPPD ENRGIZ EISL ESPINOSA ELEC EAIG ESLCO EUREM ENTG ERD EINVECONSENVCSJA EEPET EUNCH ECINECONCS ETRO ETRDECONWTOCS ECUN EFND EPECO EAIRECONRP ERGR ETRDPGOV ECPN ENRGMO EPWR EET EAIS EAGRE EDUARDO EAGRRP EAIDPHUMPRELUG EICN ECONQH EVN EGHG ELBR EINF EAIDHO EENV ETEX ERNG ED
KMDR KPAO KPKO KJUS KCRM KGHG KFRD KWMN KDEM KTFN KHIV KGIC KIDE KSCA KNNP KHUM KIPR KSUM KISL KIRF KCOR KRCM KPAL KWBG KN KS KOMC KSEP KFLU KPWR KTIA KSEO KMPI KHLS KICC KSTH KMCA KVPR KPRM KE KU KZ KFLO KSAF KTIP KTEX KBCT KOCI KOLY KOR KAWC KACT KUNR KTDB KSTC KLIG KSKN KNN KCFE KCIP KGHA KHDP KPOW KUNC KDRL KV KPREL KCRS KPOL KRVC KRIM KGIT KWIR KT KIRC KOMO KRFD KUWAIT KG KFIN KSCI KTFIN KFTN KGOV KPRV KSAC KGIV KCRIM KPIR KSOC KBIO KW KGLB KMWN KPO KFSC KSEAO KSTCPL KSI KPRP KREC KFPC KUNH KCSA KMRS KNDP KR KICCPUR KPPAO KCSY KTBT KCIS KNEP KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG KNNB KGCC KINR KPOP KMFO KENV KNAR KVIR KDRG KDMR KFCE KNAO KDEN KGCN KICA KIMMITT KMCC KLFU KMSG KSEC KUM KCUL KMNP KSMT KCOM KOMCSG KSPR KPMI KRAD KIND KCRP KAUST KWAWC KTER KCHG KRDP KPAS KITA KTSC KPAOPREL KWGB KIRP KJUST KMIG KLAB KTFR KSEI KSTT KAPO KSTS KLSO KWNN KPOA KHSA KNPP KPAONZ KBTS KWWW KY KJRE KPAOKMDRKE KCRCM KSCS KWMNCI KESO KWUN KPLS KIIP KEDEM KPAOY KRIF KGICKS KREF KTRD KFRDSOCIRO KTAO KJU KWMNPHUMPRELKPAOZW KEN KO KNEI KEMR KKIV KEAI KWAC KRCIM KWCI KFIU KWIC KCORR KOMS KNNO KPAI KBWG KTTB KTBD KTIALG KILS KFEM KTDM KESS KNUC KPA KOMCCO KCEM KRCS KWBGSY KNPPIS KNNPMNUC KWN KERG KLTN KALM KCCP KSUMPHUM KREL KGH KLIP KTLA KAWK KWMM KVRP KVRC KAID KSLG KDEMK KX KIF KNPR KCFC KFTFN KTFM KPDD KCERS KMOC KDEMAF KMEPI KEMS KDRM KEPREL KBTR KEDU KNP KIRL KNNR KMPT KISLPINR KTPN KA KJUSTH KPIN KDEV KTDD KAKA KFRP KWNM KTSD KINL KJUSKUNR KWWMN KECF KWBC KPRO KVBL KOM KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG KEDM KFLD KLPM KRGY KNNF KICR KIFR KM KWMNCS KAWS KLAP KPAK KDDG KCGC KID KNSD KMPF KPFO KDP KCMR KRMS KNPT KNNNP KTIAPARM KDTB KNUP KPGOV KNAP KNNC KUK KSRE KREISLER KIVP KQ KTIAEUN KPALAOIS KRM KISLAO KWM KFLOA
PHUM PINR PTER PGOV PREL PREF PL PM PHSA PE PARM PINS PK PUNE PO PALESTINIAN PU PBTS PROP PTBS POL POLI PA PGOVZI POLMIL POLITICAL PARTIES POLM PD POLITICS POLICY PAS PMIL PINT PNAT PV PKO PPOL PERSONS PING PBIO PH PETR PARMS PRES PCON PETERS PRELBR PT PLAB PP PAK PDEM PKPA PSOCI PF PLO PTERM PJUS PSOE PELOSI PROPERTY PGOVPREL PARP PRL PNIR PHUMKPAL PG PREZ PGIC PBOV PAO PKK PROV PHSAK PHUMPREL PROTECTION PGOVBL PSI PRELPK PGOVENRG PUM PRELKPKO PATTY PSOC PRIVATIZATION PRELSP PGOVEAIDUKNOSWGMHUCANLLHFRSPITNZ PMIG PREC PAIGH PROG PSHA PARK PETER POG PHUS PPREL PS PTERPREL PRELPGOV POV PKPO PGOVECON POUS PGOVPRELPHUMPREFSMIGELABEAIDKCRMKWMN PWBG PMAR PREM PAR PNR PRELPGOVEAIDECONEINVBEXPSCULOIIPBTIO PARMIR PGOVGM PHUH PARTM PN PRE PTE PY POLUN PPEL PDOV PGOVSOCI PIRF PGOVPM PBST PRELEVU PGOR PBTSRU PRM PRELKPAOIZ PGVO PERL PGOC PAGR PMIN PHUMR PVIP PPD PGV PRAM PINL PKPAL PTERE PGOF PINO PHAS PODC PRHUM PHUMA PREO PPA PEPFAR PGO PRGOV PAC PRESL PORG PKFK PEPR PRELP PREFA PNG PGOVPHUMKPAO PRELECON PINOCHET PFOR PGOVLO PHUMBA PRELC PREK PHUME PHJM POLINT PGOVPZ PGOVKCRM PGOVE PHALANAGE PARTY PECON PEACE PROCESS PLN PRELSW PAHO PEDRO PRELA PASS PPAO PGPV PNUM PCUL PGGV PSA PGOVSMIGKCRMKWMNPHUMCVISKFRDCA PGIV PRFE POGOV PEL PBT PAMQ PINF PSEPC POSTS PHUMPGOV PVOV PHSAPREL PROLIFERATION PENA PRELTBIOBA PIN PRELL PGOVPTER PHAM PHYTRP PTEL PTERPGOV PHARM PROTESTS PRELAF PKBL PRELKPAO PKNP PARMP PHUML PFOV PERM PUOS PRELGOV PHUMPTER PARAGRAPH PERURENA PBTSEWWT PCI PETROL PINSO PINSCE PQL PEREZ PBS

Browse by classification

Community resources

courage is contagious

Viewing cable 09CAIRO565, Egyptian Deputy Central Bank Governor discusses

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.
To understand the justification used for the classification of each cable, please use this WikiSource article as reference.

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. #09CAIRO565.
Reference ID Created Released Classification Origin
09CAIRO565 2009-04-02 13:45 2011-08-24 16:30 UNCLASSIFIED Embassy Cairo
VZCZCXYZ0000
RR RUEHWEB

DE RUEHEG #0565/01 0921345
ZNR UUUUU ZZH
R 021345Z APR 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 2080
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS CAIRO 000565 
 
SIPDIS 
 
STATE FOR USTR 
 
E.O. 12958: N/A 
TAGS: ECON EPET EFIN EAGR ETRD ENRG PGOV EG
SUBJECT:  Egyptian Deputy Central Bank Governor discusses 
intervention and the economy 
 
1. (SBU) Key Points: 
 
--Deputy Central Bank (CBE) Governor Hisham Ramez said that the 
general nominal weakening of the Egyptian pound from July 2008 
onward was primarily a function of market forces. 
 
--After the pound hit a recent high of LE 5.7/$US in the exchange 
bureaus during the weekend of March 15, the CBE felt it had to 
signal to the market that trading for speculative purposes alone 
needed to be curtailed. 
 
-- He shared the general optimism expressed by private analysts that 
inflation would continue to trend downwards, likely reaching single 
digits before June. He expected the real interest rate, which has 
been negative since December 2007, to become positive this summer. 
 
--Since 80 percent of GDP is driven by consumption, Ramez argued 
that the government should be finding ways to stimulate consumption. 
 He argued the 15 billion LE stimulus this fiscal year and 15 
billion LE next year may not be enough. 
 
 
Central Bank Intervention 
------------------------- 
 
2.  (SBU) Deputy Central Bank of Egypt (CBE) Governor Hisham Ramez 
discussed the CBE's approach toward inflation and the exchange rate 
with Treasury Attache on April 1.  Regarding the CBE's interventions 
in the foreign exchange market, Ramez stuck close to standard CBE 
talking points, noting that the CBE's policy is to allow supply and 
demand to dictate the exchange rate and that the CBE has no 
predetermined price for the pound in mind, and that the fundamentals 
of the country's economy will ultimately determine what the pound's 
value is.  He said that the general nominal weakening of the 
currency from July 2008 until very recently was a function of market 
forces.  He noted that it was a well known fact that Egypt's balance 
of payments situation was deteriorating and with it should come a 
natural weakening of the pound.  However, in late February when 
Prime Minister Nazif made comments about the pound weakening, the 
CBE started to witness much more speculative activity in the market. 
 
 
3.  (SBU) After the pound hit LE5.7/$US in the exchange bureaus 
during the weekend of March 15, the CBE felt it had to signal to the 
market that trading for speculative purposes needed to be curtailed. 
 He said all the CBE wanted was enough of an intervention to 
demonstrate to currency speculators that the CBE was willing to 
intervene to prevent disorderly depreciation.  When asked what he 
thought of the press reporting on the intervention size, which 
varied from reports saying that the CBE spent $1 billion to "less 
than $100 million," he called the $1 billion reference "ridiculous" 
and pointed out what he had also pointed out to journalists - there 
were only $330 million in foreign currency purchases in the 
interbank market that day, so the CBE intervention had to be less 
than that.  When journalists then glommed onto a figure of $100 
million, he neither confirmed nor denied, but he told us it was less 
than $100 million.  He felt that the pound's stable trading around 
LE5.65/$US ever since the intervention shows that speculation has 
slowed or stopped and that the current price is a relatively 
accurate price for the currency.  He noted that the Egyptian focus 
on the dollar-pound rate was unwarranted, and that the euro-pound 
rate was equally, if not more, important.  The CBE's intention to 
focus increasingly on the euro-pound rate was also conveyed in last 
November's IMF Article IV consultations with the GOE on 
macroeconomic policy conditions.  (Note: During the recent period in 
which the pound has nominally depreciated by about four percent 
against the dollar, the pound has appreciated against the euro. 
Compared with most world currencies, the pound has been very stable, 
and on a trade weighted basis, the pound has appreciated.) 
 
Reserve Adequacy 
---------------- 
 
4.  (SBU) Ramez noted that the Central Bank still has large reserves 
and that "reserves are there for a purpose, so we will use them if 
we have to."  That said, when referencing the $1 billion 
intervention figure from the press, he said that the CBE would not 
want to have to intervene that much, as it could indicate a more 
significant erosion of reserves.  He said the end-March reserve 
level was $32.187 billion, which shows an $886 million decrease 
compared with end-February ($32.1 billion still represents 8 months 
of imports or 657% of short-term debt).  The $866 million decrease 
is the largest monthly drop reported recently, and it throws into 
question how much the CBE really is intervening.  Based on Ramez's 
end-March number, reserves have fallen $2.8 billion, or about 8%, 
since their peak in September 2008.  In last November's IMF Article 
IV, the authorities indicated that they felt the reserves were 
adequate such that the balance of payments pressures could be met 
comfortably with a modest decline in CBE net reserves and more 
 
 
flexible exchange rate management.  When asked about the composition 
of the reserves, he noted that only he and the Central Bank Governor 
know the details, but said that all the international reserves are 
in very conservative government paper, with none in corporate bonds 
or equities.  He said that given recent low global interest rates, 
the CBE had been shortening the tenure of its investments. 
 
5.  (SBU) Comment: While the deterioration in reserves is not 
unexpected, and the levels remain healthy, the monthly reduction has 
become rather consistent and cannot continue forever.  Currency 
traders may continue to watch CBE response to the weakened pound and 
could test the CBE's commitment to market principles. End comment. 
 
Inflation 
--------- 
 
6.  (SBU) Regarding inflation, he shared the general optimism 
expressed by private analysts that inflation would continue to 
decline, likely reaching single digits "before June". He expected 
the real interest rate (difference between the nominal interest rate 
and inflation), which has been negative since December 2007, to 
become positive this summer.  He noted, however, that with the pound 
depreciating and monetary policy easing, he remains concerned about 
inflation ticking back up next year.  Hence, he noted, the recent 
decision to bring rates down by only 50 basis points, rather than 
100, showed the Central Bank's conservatism.  Acknowledging the 
tremendous political pressure that the CBE has been under from 
nearly all parts of the government and the private sector to reduce 
rates more quickly, Ramez stuck to standard CBE talking points that 
price stability remains the overarching objective of the Central 
Bank, and with real interest rates negative, as they have been 
recently, there was no way to reduce rates more quickly.  He is also 
concerned about the rising government deficit, which he argued could 
contribute to inflationary pressures.  He also noted that the CBE 
intends to keep modernizing its monetary practices, with publication 
of the minutes of the Monetary Policy Committee meetings, one of the 
next important transparency improvements, expected within a year. 
 
7. (SBU) Ramez noted that foreign investors left the Egyptian market 
very quickly in September-October 2008 at the peak of the worldwide 
financial crisis, as risk appetite dried up and investors had to 
cover their margins elsewhere.  While losing $8-10 billion in such a 
short time was a shock to the system in Egypt, he noted that the 
withdrawal of foreign investors was orderly, and Egypt took pride in 
the fact that when investors wanted to take their dollars home, they 
did not face any limitations or restrictions.  He felt that this 
"positive" experience for investors will be remembered and will 
contribute to their desire to return when risk appetites return.  He 
expected to start seeing a return of foreign investors later this 
year. 
 
Banks 
----- 
 
8. (SBU) Ramez noted his frustration that banks in Egypt "still have 
a free lunch," meaning that they can safely make much of their money 
from investing in nearly risk free Egyptian government treasury 
bills.  Growth in lending and the leverage ratios at banks have 
barely moved in the past several years.  Ramez reiterated that the 
CBE will not force banks to lend, but that they will try to find 
ways to make lending a more attractive business activity to banks. 
He also noted that the state-owned banks still have a ways to go in 
terms of modernizing and behaving on a commercial basis. 
 
Crisis Reaction 
--------------- 
 
9. (SBU) Regarding the slowdown in growth and the government's focus 
on trying to maintain high growth rates, he noted that interest 
rates will not contribute to economic recovery as much as fiscal 
spending will.  Since 80% of GDP is driven by consumption, the 
government should be finding ways to stimulate that consumption, so 
he argued the LE 15 billion (US$2.65 billion) stimulus this fiscal 
year and LE 15 billion (US$2.65 billion)next year would not be 
enough.  He expressed optimism in terms of the global response and 
the response in Egypt, noting that the U.S. had acted quickly and 
that international cooperation was unprecedented.  He noted that the 
Finance Minister was under considerable pressure to simultaneously 
keep the deficit down while stimulating growth and sticking to the 
GOE reform agenda. 
SCOBEY