Since events have been moving fast in Egypt since our last update we have thought it useful to summarise
our thoughts on recent key events and the political and economic outlook for the country.
The good news:
• Egypt is on the path to become a functioning democracy with a reasonably clear timetable:
Constitution is being re-written to set a maximum term limit for the president of two four-year terms
and also allowing independent candidates to run both for the presidency and for Parliament. Elections
are likely to take place in Sep/Oct 2011, followed by Parliamentary elections in 2012 under a new
constitution.
• The worst geopolitical fears of the West and Israel are unlikely to materialise: Neither the Muslim
Brotherhood nor the Army will put forward candidates for the presidency. The Muslim Brotherhood
has also announced that they are only contesting 1/3 of the parliamentary seats. This makes it highly
unlikely that the Israeli-Egyptian Peace Treaty which is the cornerstone for the US financial support to
Egypt will be unilaterally cancelled.
• Strong consensus presidential candidate who has credibility both internationally and domestically is
emerging: Amr Moussa, the outgoing Egyptian Arab League secretary general, will seek election as
president. He is the only potential candidate with name recognition among the people who is also
tolerated by the army and world leaders can also coexist with him. Moussa is expected to set a
precedent by saying he'll only stand for one term; easily justified given his age (75).
• Central Bank and local banks have enough short term liquidity to withstand pressure on the currency
and interest rates. Nevertheless certain crowding out by increased government borrowing is likely.
• Gulf countries such as Saudi Arabia have also pledged financial support in case Egypt experiences
funding difficulties or loses US aid.
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