Whither Egypt (II) – Economic Bankruptcy

Human Wrongs Watch

By Baher Kamal*

Cairo, 21 April 2013 – Egyptians are frustrated, feel lost and do not know where they are heading to. This short, dramatic conclusion has lastly been the most reiterated sentence by all opposition movements, and –more importantly– by the overwhelming majority of people here.

**Mass protests in Tahrir Square, Cairo | Credit: Lilian Wagdy | Source: The Egyptian Liberal | Wikimedia Commons.

**Mass protests in Tahrir Square, Cairo | Credit: Lilian Wagdy | Source: The Egyptian Liberal | Wikimedia Commons.

Foreign currency reserves are reported to be nearly finished; exchange rates have been lastly as high in favour of foreign currencies as law is the value of national currency, the Egyptian pound.

Railways workers, university students, hotel staffs, among many other sectors, have declared strikes. Elderly people, specially women, do not dare going out nor walking in the streets by themselves as they fear being assaulted by criminal gangs.

It has been estimated that more than 50 percent of all Egyptians –who total over 90 million- are now poor. And that up to 16 percent of Egyptian families live each one in one single room, where they sleep, cook, wash and cover their “sanitation” needs.

Inflation, Deficit… and Loans

The monthly inflation rate is now estimated in nearly 1 percent, making an annual average of 12 percent.

Egyptian public deficit now reaches around 20 billion dollars. President Mohamed Morsi’s government has in the last weeks intensified negotiations for an International Monetary Fund (IMF) loan of nearly five billion dollars.

Qatar has announced its decision to provide Egypt with three billion dollars in the form of either a deposit or state bonds. Details still to be discussed.

Also Libya announced its decision to support the broken Egyptian economy with a two billion dollars loan.

Opposition leaders and most people with a relatively higher level of education, are all against these loans.

And in spite of presidential and governmental insistence in showing that both Qatar, Libya and IMF readiness to rescue the Egyptian economy, strong fears have been expressed by experts and economists regarding the “hidden conditions” of such loans and the price that Egyptian citizens will inevitably have to pay for them.

Ambiguos Conditions

For instance, a number of economists have demanded that the government reveals the “ambiguous conditions” of the Qatari loan. They have stressed the need that the government discloses where this “support” will be spent and how, wether in the form of development projects or to only buy food so that it can meet the population basic needs.

There are also serious fears regarding the IMF deal, which will imply lifting the state subsidies to basic items such as bread, water, electricity and fuel, among many others.

Said Mohsen Adel, deputy head of the Egyptian Society for Finance and Investment Studies, poses the following four key questions regarding these loans, specially the Qatari one: time-line? at what interest rates? on what the money will be spent? Can Qatar re-sell these bonds in the international financial markets?

The U.S… Aid!

In addition to all these signs of “support” to the Egyptian broken economy, the United States federal budget proposal for 2014, includes a proposal to provide this countries with 1,550 billion dollars, but –mind you– 1,3 billions of this fund is to be delivered as “military” assistance, and just 250 millions as aid.

The U.S. Military assistance is intended for Egypt to purchase weapons from the United States war industry.

At the same time, the World Bank (WB) informs in its overview report this month “Egypt’s economy is still suffering from a severe downturn and the government faces numerous challenges as to how to restore growth, market and investor confidence.” 

Political and institutional uncertainty, a perception of rising insecurity and sporadic unrest continue to negatively affect economic growth,” the World Bank adds, while explaining that real GDP (Gross Domestic Product) growth slowed to just 2.2 percent year on year in October-December 2012/13 and investments declined to 13 percent of GDP in July-December 2012.

The economic slowdown contributed to a rise in unemployment, which stood at 13 percent at end-December 2012, with 3.5 million people out of work. Foreign exchange reserves have continued to decline and are now less than 3 months of imports,” the WB reports.

Dramatic Changes

As a background, the World Bank says that Egypt has undergone dramatic political changes since the 2011 revolution toppled the regime of former President Hosni Mubarak.

In June 2012, elections were held and Mohamed Morsi won with 51.7 percent of the votes. President Morsi, a leading member of the Muslim Brotherhood and the Freedom and Justice Party (FJP), took office on 30 June 2012.

The delayed parliamentary elections are scheduled to be held in October 2013. All Islamist-affiliated parties confirmed that their participation,” adds the World Bank.

The International Monetary Fund

The international financial institution explains that ongoing political tensions have prolonged Egypt’s bid to secure a $4.8 billion loan from the International Monetary Fund.

The IMF has been discussing a program of support with the government and calling for stronger fiscal adjustment, full disclosure of underlying measures, and broader political support.”

Although only a little over half of the population lives in rural areas, more than 78 percent of the poor and 80 percent of the extreme poor live there, according to the World Bank.

These income disparities are reinforced by the gaps in social indicators, where virtually all health indicators and literacy rates are worse in Upper Egypt than in Lower Egypt and worse in rural areas than in urban areas.”

The WB also reports that illiteracy rates among young women in Upper Egypt are 24 percent, twice the rates of their male counterparts.

And likewise the World Bank, major international financial institutions insist on the need for vast investments in Egypt.

Meanwhile, main opposition parties and political leaders coincide in the fact that president Morsi’s policies and government has already proved to be a big failure.

What to do then? (To Be continued)

This is Part II of a series of articles about the current social, economic and political situation in Egypt.

*baher-kamal-bonnBaher Kamal is an Egyptian-born, Spanish national, secular, pro-peace and human rights  journalist.  Kamal is Human Wrongs Watch publisher and editor.

This article can be republished –thanks for sourcing and linking to: Human Wrongs Watch


Read also:

Whither Egypt (I) – Did You Say Dictatorship?

Egypt: Morsi’s Information Minister Accused of Sexual Harassment

What Happened to Egypt’s Dream of Religious Freedom?

US-backed Egyptian Regime Inflames Sectarian Violence

2013 Human Wrongs Watch 

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