IB Assignment

Egypt

Asmita Karanje – 13012

Deepika Dholkheria – 13014
Nikita Doshi – 13024
Rupali Varshney – 13040
Group 4
Section A
Contents
A. What are emerging markets? ............................................................................................................. 3
B. How to perform a country risk analysis? ........................................................................................... 4
C. The outline risk analysis for any one of the emerging markets, ......................................................... 5
D. Factors that are considered important in determining foreign exchange rates and the various ER
regimes in operation ............................................................................................................................. 16
E. The foreign exchange reserves of China, Russia, Brazil, Vietnam, South Korea and India as at 15
February 2011. ...................................................................................................................................... 19
REFERENCES .......................................................................................................................................... 22
Our group has been chosen as the advisor to the Chairman of a very large manufacturing
organization headquartered in the Netherlands. We have prepared detailed notes with regards
to the questions put forth by the Chairman

A. What are emerging markets?

Emerging markets are nations with social or business activity in the process of rapid growth
and industrialization. At 2006, there are around 28 emerging markets (at 2010, more than 40
emerging markets) in the world, with the economies of China and India considered to be the
largest.

In the 2008 Emerging Economy Report, the Center for Knowledge Societies defines
Emerging Economies as those "regions of the world that are experiencing rapid
informationalization under conditions of limited or partial industrialization."

The term Emerging markets is used by investment analysts to categorize countries that are in
a transitional phase between developing countries that are just beginning to industrialize and
countries that are fully developed.

The main significance of the use of the term is that investments in emerging markets are
assumed to carry greater risk and offer less safety in investment. The term is often used
interchangeably with developing markets, though this is somewhat inaccurate. Examples of
emerging markets include the BRIC countries (Brazil, Russia, India, and China), several
Southeast Asian countries, Eastern Europe, and parts of Africa and Latin America.

Emerging markets generally do not have the level of market efficiency and strict standards
in accounting and securities regulation to be on par with advanced economies (such as the
United Stated, Europe and Japan), but emerging markets will typically have a physical
financial infrastructure including banks, a stock exchange and a unified currency.

Emerging markets are characterized by strong economic growth, resulting in an often

marked rise in GDP and disposable income. As a result, people in emerging countries are
often able to buy goods and services that they previously would not have been able to afford.
This provides international companies with the opportunity to tap large, new customer
bases, potentially driving significant growth for a number of companies and industries.
Though disposable incomes in emerging markets are rising, many of their citizens are still
relatively poor. Luxury goods such as high-end automobiles and designer clothes are sure to
benefit from the increased purchasing power of emerging economies, but everyday luxuries
such as cell phones and brand name food products are becoming popular much more quickly.

Emerging markets are sought by investors for the prospect of high returns, as they often
experience faster economic growth as measured by GDP. Investments in emerging markets
come with much greater risk due to political instability, domestic infrastructure
problems, currency volatility and limited equity opportunities (many large companies
may still be "state-run" or private). Also, local stock exchanges may not offer liquid markets
for outside investors.

B. How to perform a country risk analysis?

There are various ways in which a country risk analysis can be performed. After going
through various country risk reports, we understood the one common thread in all of them.
They take into consideration several factors as mentioned below and according to certain set
parameters they give each of the factor a rating which is then evaluated and incorporated in
the risk analysis report.

Factors included in the ranking of countries by risk:

 Political and Legal risk

 Social Risk
 Economic performance/projections
 Structural assessment
 Debt indicators
 Credit Ratings
 Access to bank finance
 Access to capital markets

Social, Political and Legal Climate

The analysis of country risk should also take into consideration the country's social, political
and legal climate, including:

 The country's natural and human resource potential.

 The willingness and ability of the government to recognize economic or budgetary
problems and implement appropriate remedial action.
 The degree to which political or regional factionalism or armed conflicts are adversely
affecting government of the country.
 Any trends toward government-imposed price, interest rate, or exchange controls.
 The degree to which the country's legal system can be relied upon to fairly protect the
interests of foreign creditors and investors.
 The accounting standards in the country and the reliability and transparency of
financial information.
  The extent to which the country's laws and government policies protect parties in
electronic transactions and promote the development of technology in a safe and
sound manner.

Types of Country Risk Assessment

 A macro assessment of country risk is an overall risk assessment of a country without
considering the MNC’s business.
 A micro assessment of country risk is the risk assessment of a country with respect to
the MNC’s type of business.
 The overall assessment thus consists of macro political risk, macro financial risk,
micro political risk, and micro financial risk.
 There is clearly a degree of subjectivity in:
1. Identifying the relevant political and financial factors,
2. Determining the relative importance of each factor, and
3. Predicting the values of factors that cannot be measured objectively.

Techniques of Assessing Country Risk

 The checklist approach involves rating and weighting all the macro and micro
political and financial factors to derive an overall assessment of country risk.
 The Delphi technique involves collecting various independent opinions and then
averaging and measuring the dispersion of those opinions.
 Quantitative analysis techniques like regression analysis can be applied to historical
data to assess the sensitivity of the business to various risk factors.
 Inspection visits involve traveling to a country and meeting with government officials,
firm executives, and consumers to clarify uncertainties.
 Often, firms use a variety of techniques for making country risk assessments.
 For example, they may use the checklist approach to develop an overall country risk
rating, and some of the other techniques to assign ratings to the factors.

C. The outline risk analysis for any one of the emerging markets,

The country that we have chosen is Egypt.

Reason: With the current political risk hovering this country and keen interest in
understanding the economy of one of the African countries, we have selected Egypt.

ECONOMIC RISK: HIGH

Egypt is one of the most undynamic economies of the world. The Nile River Delta is not
navigable at all, and it is crisscrossed by omnipresent irrigation canals in order to make the
desert bloom. This imposes massive infrastructure costs upon Egyptian society at the same
time as it robs it of the ability to float goods cheaply from place to place. This mix of high
capital demands and low capital generation has made Egypt one of the poorest places in the
world in per capita terms. There just has not been money available to fund development.

As a result, Egypt lacks a meaningful industrial base and is a major importer of consumer
goods, machinery, vehicles, wood products (there are no trees in the desert) and foodstuffs
(Egypt imports roughly half of its grain needs). Egypt’s only exports are a moderate amount
of natural gas and fertilizer, a bit of oil, cotton products and some basic metals.

The bottom line is that even in the best of times Egypt faces severe financial constraints — its
budget deficit is normally in the range of 7 to 9 percent of gross domestic product (GDP)
— and with the recent political instability, these financial pressures are rising.

The military leadership — exploited the population’s deposits in the banking system. This
military elite — or, more accurately, the firms it controlled — took out loans from the
country’s banks without any intention of paying them back. This practice enervated the banks
in particular and the broader economy in general and contributed to Egypt’s chronic capital
shortage. It also forced the government to turn to external sources of financing to operate, in
particular the U.S. government, which was happy to play the role of funds provider during the
final decade of the Cold War. There were many results, with high inflation, volatile living
standards and overall exposure to international financial whims and moods being among the
more disruptive.

Mubarak’s son Gamal sought to change the way Egypt did business in order to build his own
corporate empire. One of the many changes he made was empowering the central bank to
actually enforce underwriting standards at the banks. The effort began in 2004, and early
estimates indicated that as many as one in four outstanding loans had no chance of
repayment. By 2010 the system was largely reformed and privatized, and the military
elite’s ability to tap the banks for “loans” had largely disappeared. The government was
then able to step into that gap and tap the banks’ available capital to fund its budget deficit. In
fact, it is this arrangement that allowed Egypt to weather the recent global financial crisis as
well as it did. For the first time in centuries, Egypt’s financial position was not entirely
dependent upon outside forces. The economy was hardly thriving, but economically, Egypt
was certainly a more settled place. For example, Egypt now has a mortgage market, which
did not exist a decade ago.

Some Indicators:

Robust GDP Growth – Egypt weathered the recession well. But it is still below growth rates
recorded between 2005-08
Inflation has come down but still remains at double digit levels.

Unemployment Rate is high (9%)

Expansionary Economic Policies – After 6 consecutive years of improvement, the budget

deficit increased to 8.3 % of GDP in FY10. Public Debt remains high though declining to
72% of GDP. But its foreign debt load is only 11 percent of GDP. In addition to its fiscal
stimuli package, the Egyptian Central Bank cut its lending interest rate by 375 basis points to
9.75%. The government now aims to resume its medium-term fiscal consolidation strategy by
strengthening tax enforcement, raising sales tax on some items and rationalizing food and
energy subsidies to bring the fiscal deficit down to about 3% of GDP by FY2015.

Slowing Reform speed – Rapid Economic Growth is needed to fight poverty and provide
jobs.

These changes and others like them earned the Mubarak family the military’s ire. With the
constitution suspended, the parliament dissolved and military rule the order of the day, it
stretches the mind to think that the central bank will be the singular institution that will retain
any meaningful policy autonomy. If the generals take the banks back for themselves, Egypt
will have no choice but to seek international funds to cover its budget shortfalls.

Yet Egypt cannot simply tap international debt markets like a normal country. While its
foreign debt load is small, its total debt levels are very similar to states that have faced default
and/or bailout problems in the past. An 8-percent-of-GDP budget deficit and a 72-percent-of-
GDP government debt load are teetering on the edge of what is sustainable. As a point of
comparison, Argentina defaulted in 2001 with a 60-percent-of-GDP debt load, and it had far
more robust income streams. Even if Egypt can find some interested foreign investors, the
cost of borrowing will be prohibitively high, and the amounts needed are daunting. Plainly
stated, Cairo needed to come up with $16 billion annually just to break even before the crisis
and the likely banking changes that will come along with it.

The megalopolis of Cairo which has more than 20 million people is literally punctuated by
fighting and protests, whereas usually it runs at full speed. High inflation and high
unemployment [especially among the youth] mixed with frustration over widespread
corruption and feelings of disenfranchisement make for quite a toxic combination. Moody’s
said Egypt suffers from ―deep-seated‖ political and socioeconomic challenges, including a
chronic high rate of unemployment, elevated inflation and widespread poverty.

Economically, the consequences are already felt.

Lets see what ratings have been assigned by different rating agencies.

After degradation done by Moody's and Standard & Poor's, Fitch as at Jan 2011 also
announced the degradation of a notch on the long-term rating of the country, to BB, while
placing it on negative watch, which does not exclude a further deterioration in the next three
months

Currency Risk–Stable. The currency risk rating is revised downwards. The

Egyptian pound is likely to come under direct pressure as a result of capital outflows. A
widening current-account deficit will also impact the exchange rate.
The country's currency has weakened, as has confidence in the government's ability to bolster
its banking sector. Investors have transferred hundreds of millions of US dollars out of the
country since January 25, the report says, and the Central Bank will be forced to spend in
order to keep the Egyptian pound stable, which could cause investors to panic. Weakened
currency would also lead to inflation. In addition, political and economic instability will stunt
growth.

Revenue from tourism—the second-largest foreign-currency earner (after oil and gas)—will
be hit hard by the ongoing political crisis. The protests have presented Egypt with a cash-
crunch problem. At $13 billion in annual revenues, tourism is the country’s most
important income stream. The recent protests shut down tourism completely — at the
height of the tourist season, no less. The Egyptian government estimates the losses to date at
about $1.5 billion. Military rule, tentatively expected to last for the next six months, is going
to crimp tourism income for the foreseeable future. Simultaneously, the government wants to
put together a stimulus package to get things moving again. Details are almost nonexistent at
present, but a good rule of thumb for stimulus is that it must be at least 1 percent of GDP — a
bill of about $2 billion. So assuming that everything goes back to normal immediately —
which is unlikely — the government would have to come up with $3.5 billion from
somewhere.
Banking Sector Risk - Stable. Banking sector risk is revised to CCC according to
FitchRatings. Egyptian banks are plagued by high levels of non-performing loans (NPLs).
The decline in economic growth as a result of lower exports and tourism revenue will make it
harder for banks to recover NPLs, which are likely to increase in 2011.

The biggest economic worry arising from Egypt is that the unrest could disrupt oil supplies,
triggering a spike in fuel prices. But given the fact that Egypt’s role in oil markets is limited,
that seems unlikely too. Egypt produced just about 1% of the global oil output last year.

There are fears that shipping through the Suez Canal, which accounts for 10 percent of world
trade, will be disrupted, which would not only strain the Egyptian budget, but also raise
commodity prices. The Egyptian army has stepped up security near the canal, and South
Korea's Hanjin Shipping re-routed some containers to avoid Egypt. However, human
resources needed to handle ships has diminished due to the demonstrations, and the ports in
Alexandria, Damietta and Port Said are manned by a "skeleton workforce."

Another concern is that the 220-mile Sumed oil pipeline will be "sabotaged by protesters or
terrorists," even though the government doubled the amount of guards along the pipeline. A
disruption of oil flow in the pipeline could raise oil prices; a barrel of oil rose over $100 in
the US on January 31 due to concerns over Egypt.

However, despite some jittery trading in global markets over the past week, experts believe
the fear that Egypt could destabilise the global economy looks premature. The markets have
also signalled only mild concerns about Egyptian risk.

Country Forecast Overview (3 Year)

Key Indicators 2010 2011 2012
Real GDP Growth (%) 3.20 2.10 2.20
Consumer Price Inflation (av;%) 11.10 14.60 11.30
Budget Balance (% of GDP) -8.00 -12.00 -9.70
Current-Account Balance (% of
-1.60 -6.70 -3.90
GDP)
Exchange Rate US$:Euro (av) 5.63 6.40 6.20
Exchange Rate US$:Euro(year-
5.80 6.00 6.00
end)
Source: Country Forecast Egypt July 2010

Year GDP in Billions of USD PPP % GDP Growth

2006 367.74 4.87
2007 405.39 5.14
Year GDP in Billions of USD PPP % GDP Growth
2008 443.90 5.22
2009 468.96 2.83
2010 495.80 3.20
Source: EIU Country Data

Egypt: risk assessment

Risk February 2011
Sovereign risk CCC
Currency risk B
Banking sector risk CCC
Political risk CCC
Economic structure risk B
Source: Egypt: Country risk summary

Egypt’s economic growth is expected to remain in the 5% per year range through 2011.
While these growth figures represent a decline from 2007 and 2008 they are relatively strong
given global economic conditions. The global slowdown and falling commodity prices have
helped to ease inflationary pressures which mounted in 2008 until price increases peaked at
over 20% in 2009. This year inflation has come back down to high single digits.
Following are certain points of interest about the Egyptian Economy

1. The Egyptian economy has been evolving from a highly nationalized, government-
controlled platform to a more market-driven model.
2. While the Egyptian economy is relatively large and diversified it is heavily reliant on
world economic conditions due to its large export and tourism sectors.
3. This vulnerability led to the economic slowdown during this period of global
recession as many of Egypt’s trading partners are experiencing an economic
recession. Therefore the positive outlook for growth is predicated on a global
recovery.
2. The government's overriding concern in the forecast period will be to maintain
economic activity and job creation in a climate of slower economic growth compared
with the boom in 2005-08. The government will continue to press ahead with
economic reform and liberalisation, although concerns over political unrest are likely
to slow progress in some key areas, such as reform of the public administration and
the implementation of the new property tax.
3. Measures introduced so far include sharp cuts in income tax rates and customs duties,
which have successfully led to a widening of the tax base. In the second half of 2010
the government will resume its programme of incrementally reducing subsidies on
energy prices in a bid to align domestic prices with international prices and minimise
the fiscal drain, and it aims to have eliminated all energy subsidies by the end of 2011.
4. The government's consolidation programme in the banking sector means that Egypt's
banks face little risk of contagion, and domestic liquidity will remain at comfortable
levels. The government will continue to tighten regulation and to work on improving
access to finance for the private sector. The government is aware of the risk of social
dislocation if liberalisation moves too quickly, and reform will remain gradual.
5. A new public-private partnership (PPP) law should facilitate the implementation of
PPPs and thereby speed up the ongoing government programme to improve Egypt's
infrastructure in areas such as hospitals, roads, railways, ports and wastewater
treatment.
POLITICAL RISK: HIGH

Egypt’s government has strong political ties to the United States, Israel and the Arab Middle
East. Egypt often serves as a mediator between more radical Arab states and the West.

According to the World Bank, relative to the rest of the world, Egypt made the largest strides
in improving its business environment between 2007 and 2008, albeit from a relatively low
base.

In the last general election, which is widely perceived to have been fraudulent, the NDP won
the vast majority of seats in the People's Assembly (the lower house). The opposition
movement that has sprung up since January 25th has demanded that parliament should be
dissolved, but this will be resisted by the new vice-president, Omar Suleiman, who has in
effect taken on the role of interim president. Mr Mubarak and Mr Suleiman have agreed to
consider amendments to the articles of the constitution specifying conditions for the holding
of the next presidential election. This election is scheduled to be held by end-September, but
it may well be brought forward. According to the existing rules, any presidential candidate
must currently either come from the leadership of a recognised party with at least one seat in
parliament (this was due to increase to 3% of seats in the lower house and 5% in the upper
house in 2017) or obtain 250 signatures from members of parliament or local councillors,
which would be virtually impossible for any independent candidate, given the NDP's
domination of all the governing bodies. The constitution also places no limit on the number
of terms that a president may serve.

Egypt's future continues to hang in the balance. Egypt’s political direction could have
profound effects on regional stability—potentially involving, for example, the Israeli-
Palestinian conflict and efforts to contain Iran’s nuclear ambitions—with broad economic and
financial ramifications. The recent economic and political developments do not bode well for
Egypt’s debt, and this contagion could continue to spread within the region, leading to the
persistent underperformance of local currency debt and equity markets. As we highlighted in
a recent MENA Focus, political stresses in Egypt have pushed other vulnerable governments
in the region to promise political reforms and increased government spending, which some of
the oil importers, like Jordan, can ill-afford. We believe, though, that investors will continue
to give special treatment to the region’s strongest economies, such as the small GCC
countries, where wealth and government resources reduce some of the economic stresses.

In Egypt itself continuing unrest implies extreme downside risks for domestic growth, even
under the most optimistic political scenario. At a minimum, we expect growth to slow
significantly in the first quarter of 2011 from the 6.2% year-over-year pace of the fourth
quarter of 2010, due to factory and bank shutdowns, a decrease in tourist inflows and ongoing
curfews. As such, we expect growth for the year to come in well below the 5.9% as almost all
components of domestic demand will be adversely affected.
SWOT Analysis of Political Environment

Strengths

 Egypt has no serious disputes with neighboring states, although its relations with
Syria and Iran are relatively tense.
 National Democratic Party's rule appears broadly stable.

Weaknesses

 Internal divisions between reformists and conservatives within the ruling NDP may
threaten stability.
 ƒ There is considerable domestic opposition to the government's relations with the
US and Israel, and, increasingly, to recent economic reforms.
 ƒ Tension exists between the government and banned Islamist groups, including the
popular MB.
 ƒ Egypt's poor human rights record and limited democratic participation creates
internal and external pressure for reform.

Opportunities

 The country is a major player in the Arab-Israeli peace process.

 ƒ Any success for Barack Obama's plans to re-engage with Syria and Iran would
benefit Egypt.

Threats

 Although the level of militant attacks, particularly on tourists and Western targets,
appears to have fallen in recent years, sporadic incidents should not be ruled out.
 There is uncertainty over political succession, given the lack of a clear-cut successor
to the president and the controversy over the political role of the president's son,
Gamal Mubarak, with rumours suggesting that Hosni Mubarak might have cancer.
 The presence of Hamas in a position of power just over the border in Gaza could be a
boost for the MB, especially if the government is seen to be acting in Israel's interests
on its Rafah border policies.
 The reported presence of Hizbullah operatives in Sinai, apparently planning to attack
tourist sites in Egypt, has highlighted the lack of effective policing in the region and
added to security risks in the area.
FINANCIAL SYSTEM RISK: HIGH

The financial sector in Egypt suffered over the years from public sector dominance.
Public banks did not adhere to international best practice, financed state-owned
enterprises, and accumulated non-performing loans. Private banks operated in a non-
competitive environment that resulted in inefficient banking practices, that limited access
to financial services, and created a lack of suitable instruments. Non-banking institutions
did not have a suitable regulatory environment in which to develop.

The General Authority for Financial Supervision (GAFS) became operational in July of
2009 and will regulate all non-banking financial activities including insurance. The
mandate of the GAFS includes supervising all non-bank financial activities to develop
and maximize their competitiveness to attract more local and foreign investments.

Though slowly diminishing, the role of the Egyptian government in economic activity
remains significant.

The government has made some progress toward divesting its ownership of public banks.

Banks in Egypt could record a wave of cash withdrawals when they resume their
operations, such examples have included companies among the hardest hit violent
protests against President Hosni Mubarak.

EGX 30 index decreased by 16% for two days until January 17, Commercial International
Bank Egypt shares, representing over one fifth of the index, falling by 12%.

Insurance companies will also be affected by a wave of claims for compensation for
properties and businesses damaged during the protests. And foreign direct investment,
which fell by 17% to $ 6.8 billion last year, could continue to decline as a result of violent
protests.
D. Factors that are considered important in determining foreign
exchange rates and the various ER regimes in operation

Factors affecting foreign exchange rates

1. Differentials in Inflation: As a general rule, a country with a consistently lower inflation

rate exhibits a rising currency value, as its purchasing power increases relative to other
currencies. During the last half of the twentieth century, the countries with low inflation
included Japan, Germany and Switzerland, while the U.S. and Canada achieved low inflation
only later. Those countries with higher inflation typically see depreciation in their currency in
relation to the currencies of their trading partners. This is also usually accompanied by higher
interest rates.

2. Differentials in Interest Rates: Interest rates, inflation and exchange rates are all highly
correlated. By manipulating interest rates, central banks exert influence over both inflation
and exchange rates, and changing interest rates impact inflation and currency values. Higher
interest rates offer lenders in an economy a higher return relative to other countries.
Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise. The
impact of higher interest rates is mitigated, however, if inflation in the country is much higher
than in others, or if additional factors serve to drive the currency down. The opposite
relationship exists for decreasing interest rates - that is, lower interest rates tend to decrease
exchange rates.

3. Current-Account Deficits: The current account is the balance of trade between a country
and its trading partners, reflecting all payments between countries for goods, services, interest
and dividends. A deficit in the current account shows the country is spending more on foreign
trade than it is earning, and that it is borrowing capital from foreign sources to make up the
deficit. In other words, the country requires more foreign currency than it receives through
sales of exports, and it supplies more of its own currency than foreigners demand for its
products. The excess demand for foreign currency lowers the country's exchange rate until
domestic goods and services are cheap enough for foreigners, and foreign assets are too
expensive to generate sales for domestic interests.

4. Public Debt: Countries will engage in large-scale deficit financing to pay for public sector
projects and governmental funding. While such activity stimulates the domestic economy,
nations with large public deficits and debts are less attractive to foreign investors. A large
debt encourages inflation, and if inflation is high, the debt will be serviced and ultimately
paid off with cheaper real dollars in the future. In the worst case scenario, a government may
print money to pay part of a large debt, but increasing the money supply inevitably causes
inflation. Moreover, if a government is not able to service its deficit through domestic means
(selling domestic bonds, increasing the money supply), then it must increase the supply of
securities for sale to foreigners, thereby lowering their prices. Finally, a large debt may prove
worrisome to foreigners if they believe the country risks defaulting on its obligations.
Foreigners will be less willing to own securities denominated in that currency if the risk of
default is great. For this reason, the country's debt rating (as determined by Moody's
or Standard & Poor's, for example) is a crucial determinant of its exchange rate.

5. Terms of Trade: A ratio comparing export prices to import prices, the terms of trade is
related to current accounts and the balance of payments. If the price of a country's exports
rises by a greater rate than that of its imports, its terms of trade have favorably improved.
Increasing terms of trade shows greater demand for the country's exports. This, in turn,
results in rising revenues from exports, which provides increased demand for the country's
currency (and an increase in the currency's value). If the price of exports rises by a smaller
rate than that of its imports, the currency's value will decrease in relation to its trading
partners.

6. Political Stability and Economic Performance: Foreign investors inevitably seek out
stable countries with strong economic performance in which to invest their capital. A country
with such positive attributes will draw investment funds away from other countries perceived
to have more political and economic risk. Political turmoil, for example, can cause a loss of
confidence in a currency and a movement of capital to the currencies of more stable
countries.
The exchange rate of the currency in which a portfolio holds the bulk of its investments
determines that portfolio's real return. A declining exchange rate obviously decreases the
purchasing power of income and capital gains derived from any returns. Moreover, the
exchange rate influences other income factors such as interest rates, inflation and even capital
gains from domestic securities. While exchange rates are determined by numerous complex
factors that often leave even the most experienced economists flummoxed, investors should
still have some understanding of how currency values and exchange rates play an important
role in the rate of return on their investments.
Various ER regimes in operation
The exchange rate regime reflects a longer term commitment of a country’s national policies
to have a certain behavior of its exchange rate vis-à-vis the currencies of other countries. The
system is expected to persist over a more extended period of time in order to provide a stable
atmosphere for business to make decisions and thus make the economic system function on a
sustainable basis.

There are basically two types of exchange rate type of regimes:

1. Fixed exchange rate type of regime

2. Floating exchange rate type of regime

But fixed and floating exchange rates are only the polar cases.there are many types in
between. The IMF categorization of exchange rate arrangements identifies the following
eight types of exchange rate regimes:

1. Exchange rate arrangement with no separate legal tender.

2. Currency board arrangements.
3. Other conventional fixed pegs(including the peg under managed floating).
4. Pegged exchange rates within horizontal bands.
5. Crawling pegs.
6. Exchange rates within crawling bands.
7. Managed floating with no pre-announced path.
8. Independently floating.
 E. The foreign exchange reserves of China, Russia, Brazil, Vietnam,
South Korea and India as at 15 February 2011.

The foreign exchange reserves of China, Russia, Brazil, Vietnam, South Korea
and India as at 15 February 2011.

RUSSIA - foreign exchange reserves

International Reserves: official reserve Billion U.S. Feb/18/11 487.4

assets (weekly) dollars

International Reserves: official reserve Million U.S. Jan/11 484,158

assets (monthly) dollars

Foreign currency reserves Million U.S. Jan/11 429,009

dollars

IMF reserve position Million U.S. Jan/11 1,920

dollars

SDRs Million U.S. Jan/11 8,876

dollars

Gold Million U.S. Jan/11 33,393

dollars

Other reserve assets Million U.S. Jan/11 10,960

dollars

Source: IMF, Special Data Dissemination Standard

INDIA- FOREIGN EXCHANGE RESERVES( IN US MILLION Dollars, FEB 18 2011)

International Reserves 300,628

Foreign Currency Assets 271,314

Gold 21,924
SDR 51,37
Reserve Position in IMF 22,53
Source: IMF, Special Data Dissemination Standard
CHINA:

Item 2010.09 2010.10 2010.11 2010.12

Gold ( 10,000
3,389 3,389 3,389 3,389
Fine Troy Ounce
Foreign
Exchange
26483.03 27608.99 27678.09 28473.38
Reserves ( 100
million USD )

The foreign exchange reserves of the Republic of China amounted to US$387.11 billion at the end of
January 2011, showing an increase of US$5.11 billion from the figure recorded at the end of the
previous month. The market value of securities investment and deposits held by foreign portfolio
investors at the end of January 2011 reached USD254.4 billion, equivalent to 66% of foreign
exchange reserves.

CHINA - At the end of January 2011

Foreign exchange reserves US$387.11 billion

Source : Central Bank of the Republic of China (Taiwan)

BRAZIL:

International Reserves
(Total Official Reserves) - daily million dollars Feb/25/11 305,709
data

International Reserves
million dollars Jan/11 288,575
(Total Official Reserves)

Foreign Currency million dollars Jan/11 276,148

IMF Reserve Position million dollars Jan/11 2,037

SDRs million dollars Jan/11 4,450

Gold million dollars Jan/11 1,519

Other Reserve Assets million dollars Jan/11 4,422

Source: IMF, Special Data Dissemination Standard

SOUTH KOREA: (FEB 6,2011)

Reserves climbed to $295.96 billion from $291.57 billion in December.

As on the end of January 2011, (in hundred million dollars)

Official foreign reserves 2,959.6
Securities 2,624.4
Deposits 285.9
IMF position 11.8
SDRs 36.7
Gold 0.8
Source: Bank of Korea

VIETNAM:

Planning and Investment Minister Vo Hong Phuc’s comment was reported on Wednesday in
the state-run Vietnam Economic Times. Phuc provided no details, and it was unclear how
much above $10 billion the reserves may be. The exact current level is guarded as a state
secret. Foreign banks have estimated as recently as late January the figure to be around, or
even below $12 billion.

vietnam - At the end of December 2010

Foreign exchange reserves and gold US $ 16,300,000,000

Source: CIA: The World Fact Book

REFERENCES
 http://www.businessinsider.com/egypts-next-crisis-the-economy-2011-2
 http://www3.ambest.com/ratings/cr/reports/Egypt.pdf
 www.seb-merchant.de/cgi-bin/pts3/mc1/mb/.../a.../Egypt_Dec_2010.pdf
 http://content.ebscohost.com/pdf23_24/pdf/2010/R71/01Jun10/51270131.pdf?T=P&P=AN
&K=51270131&S=R&D=bth&EbscoContent=dGJyMMvl7ESeqLY4xNvgOLCmr0meprZSr624SLS
WxWXS&ContentCustomer=dGJyMOzprlCuprVIucnHWsu4uYvn2Ot6
 https://www.cia.gov/library/publications/the-world-factbook/rankorder/2188rank.html