Markets rise on Mubarak's ouster
Friday, February 11, 2011; 9:59 PM
The relief over Egyptian President Hosni Mubarak's departure extended well beyond Tahrir Square, as equity markets rose and investors pushed down the price of Egyptian debt after the embattled leader announced his resignation - an expression of confidence in the changes underway in the country.
The Swiss government, meanwhile, announced that it would freeze any funds held by Mubarak or "parties close to him" to prevent "any misappropriation of Egyptian government assets."
No information about whether Mubarak has such holdings was provided. Similar precautions were taken after the departure of Tunisian President Zine el-Abidine Ben Ali, as the Swiss try to avoid their banking secrecy laws from being exploited. Egypt has begun a series of corruption investigations involving figures close to the Mubarak family, but the size and sources of Mubarak's personal wealth remain uncertain.
The massive protests and earlier clashes in Egypt had raised concerns that the country was headed for a potential economic crisis as well, if investors pulled out capital and abandoned the country's currency and stock markets amid the turmoil.
So far, that hasn't happened, and the fact that the standoff appears to be ending without extensive violence may limit the long-term damage to Egypt's economy.
There have been short-term costs: property damage and the virtual shutdown of the nation's vital tourist industry for more than two weeks.
But tourism has proved resilient - rebounding within months of the November 1997 massacre of 58 foreign tourists at Luxor - and analysts said Egypt's move toward a more open brand of politics may open its economy as well.
Mubarak's government had pursued some reforms, but state control over the economy remains substantial, and the country's reputation for corruption and insider dealing also held it back.
"If the solutions are a more-inclusive government and some attention to grievances and long-delayed reforms, you have a better environment. Growth will pick up," said George Abed, an analyst and Middle East expert with the Institute of International Finance.
The International Monetary Fund's executive board was briefed on the events in Egypt this week, and there was little sense that the country was facing imminent financial or economic crisis. The stock market remains closed, but the Egyptian pound has remained relatively stable under Central Bank rules that have limited withdrawals.
With about $35 billion in foreign reserves, the Central Bank is believed to have enough money to keep local banks funded and prevent the currency from falling too sharply.
Indexes tied to the Egyptian economy rose after Mubarak's departure.
There are risks: Egypt relies on about $10 billion a year in foreign investment, and it won't be clear whether that will continue until a new government and political system starts to take shape. The government's large budget deficit may grow bigger if officials feel the need, for example, to expand employment by hiring more public workers or, as Mubarak did on his way out, raise public wages.