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Companies test banks’ patience

Many Egyptian companies are losing money and have gearing levels of 200% or more. With no sign of an end to the domestic downturn, debt restructuring has become the name of the game.

THE FIRST HALF of 2002 has not been a bad one for the Egyptian economy. The vital tourism sector has bounced back after a nervous end to 2001, the Egyptian pound has stayed stable at 4.6 to the US dollar, and pharmaceutical and food sales have remained steady.

In July 2002, construction tenders were issued for the long-awaited gas export pipeline between Egypt and Jordan as well the liquid natural gas (LNG) plant being built by Union Fenosa at Damietta on Egypt's Mediterranean coast.

Even so, life has not been easy for most Egyptian businessmen. Export orders have been hard to win because of the strength of the pound. Foreign currency has been extremely difficult to obtain because of exchange controls imposed by the Central Bank of Egypt.

Revenue growth and margins in the telecom, construction and IT sectors - which have driven economic growth over the past five years - have fallen, and the manufacturing sector, with the odd exception, remains somewhere between stagnant and comatose.

Some Egyptian companies, particularly exporters such as Oriental Weavers, have managed to survive the domestic economic downturn. In the first quarter of 2002, the country's leading carpet maker generated net income of E£30 million.

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