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Egypt Hemorrhaging Cash

As clashes between protesters and regime troops continue in central Cairo billions are flowing out of the country amid economic uncertainty
By Gabe Kahn.
First Publish: 12/22/2011, 7:13 PM

Egyptian Prime Minister Kamal el- Ganzouri decried on Thursday that funds pledged by the US, the group of eight, and Arab states has not been delivered.

“Nothing has arrived” Ganzouri told Bloomberg, referring to $35 billion pledged for Egypt and Tunisia by the Group of Eight major economies. The premier spoke at a televised press conference in Cairo today.

Ganzouri said the Arab world delivered $1 billion of $10.5 billion promised in soft loans and aid, while the U.S. had not delivered its promised $2.25 billion in re-financing, grants and loans for small industries.

Egypt’s net outflows reached $8.9 billion in January through September. The hemorrhaging of capital was largely caused by the sale of $7.5 billion of securities, especially treasury bills, by foreigners.

Cairo's worsening economic outlook has brought record bond yields, credit rating cuts and the threat of currency devaluation.

The loss of capital has forced the government to raise its forecast for the budget deficit in the current fiscal year to 10 percent this week from 8.6 percent as Egypt's central bank announced it had used up almost half of its foreign currency reserves in 11 months of straight outflow.

Moody’s Investors Service cut Egypt’s rating by one level to B2 yesterday, citing political instability, a deterioration in the balance of payments, “increasing pressure” on government finances and the absence of “a meaningful level of exceptional, external financial support.”

Ganzouri cited “differences” between Egypt and its benefactors, complaining “everyone rushed to help Egypt, but when we differed in the past months, they turned their back on us until we agree.”

While Ganzouri didn't elaborate, US lawmakers passed a bill tying its military and financial assistance packages for Egypt to the transfer of power from the junta to a civilian government "that respects human rights, and freedom of expression and religion." A second condition was upholding the 1979 Egypt-Israel Peace Treaty.

US secretary of state Hillary Clinton on Wednesday reportedly called Ganzouri to express deep concern at the "horrible images" of demonstrators against military rule being beaten in Cairo's streets.

Earlier this week the general responsible for the Cairo junta's public relations said the demonstrators were "delinquents" who needed to be "thrown into Hitler's ovens."

Ganzouri was appointed by Egypt’s caretaker junta this month as the country faces renewed violence between security forces and demonstrators demanding that the generals step down.

Mass marches against the military regime are expected in Cairo on Friday.