Egypt Still in Dire Straits

Talks are still on-going between the IMF and Egypt over future loans worth up to $4.8 billion to get the country back on its feet. Arab aid from the IMF in the entire region has hit the $10 billion mark in the last year alone. But, if there is not action taken pretty soon, Egypt will fall into uncontrollable depths of inflation and unemployment and see unrest increase in the country.

A joint statement had already been issued at the end of April by Christine Lagarde, the Managing Director of the international Monetary Fund, along with the Governor of the Central Bank of Egypt, Hisham Ramez, the Egyptian Finance Minister, Al-Mursi Hegazy and the Minister of Planning and International Cooperation, Ashraf Al-Araby. It stated: “The authorities are firmly committed to addressing Egypt’s economic and financial challenges with the objective of restoring sustained and socially-balanced growth, and they are already taking encouraging actions in this direction. Work will continue with the objective of reaching agreement on an IMF Stand-By Arrangement to support the authorities’ national economic program in the coming weeks”.

There were five areas that were discussed. Firstly, trade integration. Then, business regulation and reforms of public institutions. The labor market needed redressing as well as access to finance. Lastly, communications must be dealt with.

Growth prospects are estimated at roughly an average of 3% in Egypt for 2013. This is only moderate growth (although a lot better than some of the countries that fund the IMF). Strange, isn’t it, that the IMF is planning on telling the others (as usual) how to run their economies, when their own economies are in disarray? Don’t do as I do, do as I say is always a good method for working practices in management, isn’t it just?

But, the 3% growth expected in Egypt is not going to do very much for those that are unemployed in the country, at the present time. There are just too many of them. Unemployment stood at 13.2% in the first quarter of this year. That’s a huge increase from the pre-Arab Spring figures of about 8.9%. But, we have to ask two questions. First of all, what types of jobs were being dished out by the dictatorship and secondly whether or not that dictatorship faked the figures (as dictators like to do, usually)?

Whatever the case may be, unemployment in Egypt has never been higher than today. The same trend can be seen across the board in all countries that went through the Arab-Spring revolutions.  Trade and unemployment have been the top priorities of Egypt for the past two years now. Youth unemployment stands at a staggering 95%. 80% of university graduates are still out of work in the country.

Inflation is also increasing in the country. In April 2013 it amounted to 8.1%. That’s nothing new, however, perhaps some might say. According to the Bank of Egypt, unemployment stood at an average of 8.9% between 1958 and 2013. It even reached a high of 35.1% in 1986. It’s the sector of food and beverages that have increased the most overall. Inflation was one of the reasons behind the ousting of President Mubarak, but it is still not under control today. The Revolution has made way for more discontent in the population of the country. Prices are expected to rise yet again in July as the country will prepare for Ramadan (around July 9th) and that’s when food prices traditionally take a hike upwards yet again in the country.

According to research carried out by the Pew Research center, 70% of Egyptians are now unhappy with the way things are going in their country concerning the economy. Unfortunately 49% of them believe that a strong economy is higher up on the to-do list than democracy. But, is that all that surprising? What’s the first thing we want in life: survival. Once you have the food and water and the shelter and protection covered, people start worrying about democracy. Isn’t that the way we work up the Pyramid of Needs (no pun intended) in life?

Imports are becoming more expensive in the face of rising inflation and scarcities are starting to show through in the market for everyday-Egyptians (such as fuel, for example). Tourism has tapered off considerably in the wake of the uprising and whereas there were 15 million tourists entering the country in 2010 before the revolution, there was a massive drop of a third immediately after and that has stuck since then. It dropped from the world ranking of 75th place as the most visited country in the world to 85th position last year.

The IMF has lent $10 billion in assistance programs to Arab countries in the last year alone. Let’s hope that the money that will be lent to Egypt will do something to increase the situation of average Egyptians. The discussions over the $4.8 billion that will boost the economy there had better have a beneficial effect. Some might question the ability of the IMF to deal with the problem. Others have seen a marked shift in the way that the IMF is dealing with the problems in the Arab-Spring countries and its questionable way of dealing with the Asian crisis of the 1990s (notably in Egypt by reducing energy subsidies which tended to benefit the rich only).

For the moment, it’s the people that are in dire straits and they are the ones that are in need of immediate help to alleviate their problems.

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tothetick

Professional team of writers/analysts analyzing the financial markets.

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