The economics of Ramadan

The reduced energy levels - and working hours - of the month of fasting affects the stock markets.

Downtown Cairo is a boisterous place. The ubiquitous honks of the car horns and the ebullience of peoples on the street ensure that any form of silence exists only in the memory. However, for one month a year, every year, the streets go silent and the shops close for as long as the energy sapping sun stings the eyes. This is the holy month of Ramadan.

One of the five pillars of Islam, every Muslim should abstain from drinking, eating, smoking (as well as a few other things) between Fajr prayers in the early morning and Maghreb Prayers in the dusk. The Qur’an prescribes it as a way of learning self-restraint.

The eschewing of water and food, however, means that those observing the fast are also affecting their energy levels. Simply walking down the street, the vitality that would once overwhelm me is conspicuous by its absence. Those that are out languishing under the relentless Cairo sun reply to my salutations with a half-hearted wave where once I would have been invited into conversation.

In an effort to manage this problem, the Egyptian government reduces the work hours of private sector and bank workers. The reduction and/or adjustment of work hours during the month of Ramadan takes place in almost every Muslim-majority country. But whereas Malaysia and Indonesia generally practice a one-hour adjustment, one-hour reduction scheme, Egypt practices a two-hour reduction for private sector workers, a three-hour reduction for banks, as well as a one-hour reduction in their stock exchange trading hours.

This may well ameliorate the situation of fasting with the workers, but it also means that over the course of Ramadan, the private sector loses around 40 hours of operating time, the banks around 60 hours and the Egyptian stock exchange around 20 hours of trading time. 

Strangely though, the effect of losing 20 hours worth of trading time on the Egyptian stock market is minimal, if anything (see graph).  Using data from the benchmark EGX30 index – which looks at the top 30 companies in terms of liquidity and activity - between the years 2000-2006 there is absolutely no correlation between the typical monthly percentage change in stock value and the percentage change in the month of Ramadan, but it does seem to suggest that the reduced trading times has increased the market’s volatility.

 

The fact that Egypt releases its GDP and growth statistics in quarterly format mean any attempt to scrutinise the Ramadan periods within them is futile. However, the latest data released by the Ministry of Planning and Ministry of Finance can be examined as it covers the period from 1 June to the present, which encapsulates most of this month of Ramadan, plus 19 days of non-fasting.  In that time, the total GDP change has been -4.1%, which correlates to a recent report by the Dinar Standard - a research and advisory firm that focuses on emerging Muslim economies – which gave an estimate of an average loss of 4% to GDPs in Muslim-majority countries.

In that report, it estimated that Egypt made a loss of nearly 8% in its monthly GDP due to it’s reduced Ramadan hours, which would result in a total loss of just over US$1.4bn for last year’s Ramadan period. The reduction of hours may be necessary exchange for worker morale, but for an economy that is already struggling to attain the considerable US$22.5bn needed to finance its deficit for this fiscal year, it’s a hefty trade-off.

Men carry food for the fast-breaking meal. Photo: Getty
Photo: Getty
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The campaign to keep Britain in Europe must be based on hope, not fear

Together we can show the world a generous, outward-facing Britain we can all be proud of.

Today the Liberal Democrats launched our national campaign to keep Britain in Europe. With the polls showing the outcome of this referendum is on a knife-edge, our party is determined to play a decisive role in this once in a generation fight. This will not be an easy campaign. But it is one we will relish as the UK's most outward-looking and internationalist party. Together in Europe the UK has delivered peace, created the world’s largest free trade area and given the British people the opportunity to live, work and travel freely across the continent. Now is the time to build on these achievements, not throw them all away.

Already we are hearing fear-mongering from both sides in this heated debate. On the one hand, Ukip and the feuding Leave campaigns have shamelessly seized on the events in Cologne at New Year to claim that British women will be at risk if the UK stays in Europe. On the other, David Cameron claims that the refugees he derides as a "bunch of migrants" in Calais will all descend on the other side of the Channel the minute Britain leaves the EU. The British public deserve better than this. Rather than constant mud-slinging and politicising of the world's biggest humanitarian crisis since the Second World War, we need a frank and honest debate about what is really at stake. Most importantly this should be a positive campaign, one that is fought on hope and not on fear. As we have a seen in Scotland, a referendum won through scare tactics alone risks winning the battle but losing the war.

The voice of business and civil society, from scientists and the police to environmental charities, have a crucial role to play in explaining how being in the EU benefits the British economy and enhances people's everyday lives. All those who believe in Britain's EU membership must not be afraid to speak out and make the positive case why being in Europe makes us more prosperous, stable and secure. Because at its heart this debate is not just about facts and figures, it is about what kind of country we want to be.

The Leave campaigns cannot agree what they believe in. Some want the UK to be an offshore, deregulated tax haven, others advocate a protectionist, mean-hearted country that shuts it doors to the world. As with so many populist movements, from Putin to Trump, they are defined not by what they are for but what they are against. Their failure to come up with a credible vision for our country's future is not patriotic, it is irresponsible.

This leaves the field open to put forward a united vision of Britain's place in Europe and the world. Liberal Democrats are clear what we believe in: an open, inclusive and tolerant nation that stands tall in the world and doesn't hide from it. We are not uncritical of the EU's institutions. Indeed as Liberals, we fiercely believe that power must be devolved to the lowest possible level, empowering communities and individuals wherever possible to make decisions for themselves. But we recognise that staying in Europe is the best way to find the solutions to the problems that don't stop at borders, rather than leaving them to our children and grandchildren. We believe Britain must put itself at the heart of our continent's future and shape a more effective and more accountable Europe, focused on responding to major global challenges we face.

Together in Europe we can build a strong and prosperous future, from pioneering research into life-saving new medicines to tackling climate change and fighting international crime. Together we can provide hope for the desperate and spread the peace we now take for granted to the rest of the world. And together we can show the world a generous, outward-facing Britain we can all be proud of. So if you agree then join the Liberal Democrat campaign today, to remain in together, and to stand up for the type of Britain you think we should be.