The benchmark stock index of Egypt saw a plunge of around 10% in the first trading session as the Islamist President of the country; Mohammed Morsi issued decrees acquiring new powers. Common people and oppositions have already started protesting in the Central Cairo and police had to fire tear gas to keep the situation under control.
Protestors are accusing Morsi of trying to grab the powers blatantly and these edicts will practically place him above the court. Egypt’s transition towards democracy has been full of turmoil and this latest unrest will surely impact the economic condition of this African country, as predicted by analysts.
EGX30 index actually dropped by 9.59 percentage points and therefore resulting into the biggest loss since February, 2011. The loss in value of shares is near to $5 billion, as estimated primarily.
According to an analyst of Pharos Securities, Mohamed Radwan, the Egyptian market is back too square one again and this time, if the unrest is not controlled within a few days, the economic situation can get even worse than what it was during the previous outrage against the Presidency of Hosni Mubarak. Mohamed added that investors have still not gained faith on Egypt’s economy which has already suffered a big blow last year. However, they were hopeful for a better future after Mursi won the elections in last June. Since then, the shares had increased by more than 35% signaling positive signs. It would have been important for the Government to come up with a proper way to woo back the investors who lost confidence on Egypt. However, the latest protest will aggravate situation further and the foreign investment may dip below.
Though Mursi who gained trust of Western countries’ by successfully negotiating the cease fire between Israel and Palestine group Hamas, calls these edicts as attempt to restore faith on Egyptian constitution, the western countries may not accept these changes. The International Monetary Fund recently agreed to send Egypt a loan of $4.8 billion so that state finances can be shored up. Under the changed circumstances, it is now to be seen whether this agreement stays valid or not.
Investors are keeping an eye on how the situation is controlled as Mursi withdrawing the decrees will put his power in question and opposition may not withdraw protests until those are withdrawn, thereby creating a deadlock.