Egyptian Crisis Driving It Broke? Not Yet . . . But Soon It Might

On the seventh day of protests, the economic and financial costs of the crisis in Egypt are becoming known, though not yet apparent.

Tourists in Egypt.

The Egyptian balance of payments is covered, at least for the next few weeks. The Mubarek government had $36 billion in reserves at the end of 2010, according to Egyptian Central Bank figures, plus (according to a Jan. 27 Citigroup note) an additional $21 billion in “unofficial reserves” with foreign banks as of October.

Capital flight from Egypt has been estimated at $500 million per day, during all of last week—but although markets are betting against the Egyptian pound and the Egyptian government’s debt, the full effects of these market actions haven’t had a serious repercussion in the country’s balance sheet.

Though local markets have been closed because of the crisis, currency dealers have reported little change in the price of the dollar, which rose a mere 0.7% last week. The Egyptian Central Bank has said it has not interfered with the exchange rate, which seems to be the consensus on the street.

The biggest danger of the crisis is to the tourism sector: It’s a $12 billion a year business for Egypt, so any disruption because of the protest will not only be immediate, but potentially long term, as Western vacationers avoid the, for fears of political unrest.

Right now, the danger for Egypt is that the crisis drags out, exacerbating both capital flight, and currency  troubles.