Khalil Hamra, Associated Press
CAIRO — Egypt's benchmark stock index extended its decline for a second consecutive day and airport officials reported a sharp drop Monday in international passenger arrivals as deadly clashes in the capital cast fresh doubts about the country's political stability days before pivotal parliamentary elections.
The Egyptian Exchange's EGX30 index closed 3.99 percent weaker, at 3,862 points, according to the exchange's Web site. The drop surpassed the previous day's 2.4 percent decline sparked by clashes between security forces and protesters in Cairo's iconic Tahrir Square, and pushed the index's year-to-date losses to almost 46 percent.
The protesters are demanding that the ruling military council announce a date for transition to a civilian government. At least 26 people have been killed in the clashes since Saturday across Egypt, the overwhelming majority in Cairo, according to a morgue official who spoke on condition of anonymity because he was not authorized to brief the media.
Meanwhile, the Egyptian pound flirted near the 6 pounds to the U.S. dollar mark, reaching levels largely unseen since the height of the Jan. 25 uprising that ousted former President Hosni Mubarak. The pound, which had hit about 5.99 pounds to the dollar, pulled back to around 5.973 pounds to the dollar later in the day. Also, Egypt's 5-year credit default swaps, the cost of insuring the country's debt, stood at 525 basis points compared to 466 basis points on Nov. 18, according to data from financial information provider Markit.
The depreciation pressures, coupled with the soaring debt costs, underscored the country's economic crunch which has been exacerbated by a nearly 40 percent erosion in net international reserves since December.
"Egypt has a massive external financing risk over the next year, and these political events are making matters worse," said Said Hirsh, Mideast economist with Capital Economics in London. "Any kind of political uncertainty is making the situation worse."
The uprising that ousted Mubarak in mid-February sparked a tide of optimism in the country, with millions expecting that nearly three-decades of authoritarian rule best defined by a system of crony capitalism and outright nepotism would be replaced by a transparent, democratic system that offered them at least the opportunity to succeed.
But those expectations have proven far greater than the reality on the ground as mass protests battered the economy, with key foreign revenue sources tourism and foreign investment taking a beating since the start of the year.
Net international reserves were down to $22 billion by the end of October, from $36 billion by the end of last year, according to Central Bank of Egypt figures. At least some of that has gone to supporting the Egyptian currency.
The unrest comes days before parliamentary elections — the first since Mubarak's ouster. The vote is seen as a milestone in Egypt's transition to a democratic system, but the violence has raised questions about whether the various parties will pull out.
Reflecting the impact of the unrest, airport officials in Cairo said at least two airlines canceled flights from Italy and Syria on Monday because of the unrest in the capital and that the number of arrivals from European nations plunged between 30 to 50 percent. The officials spoke on condition of anonymity because they were not authorized to speak with the media.
In addition, a work slowdown by roughly 500 employees at national carrier EgyptAir led to delays of up to three hour on eight of the airline's flights, the officials said.
The strike by maintenance workers and technicians was the latest in a series of labor actions that have rocked the country. In this case, the workers are demanding promotions, salary boosts and changes in some of the company's senior management.
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