Egypt’s reforms begin to pay off
Egypt is gradually emerging from years of economic turmoil caused by serial revolutionary aftershocks that shattered investor confidence and took a heavy toll on foreign currency reserves.
President Abdel Fattah El-Sisi took the reins when the country was in deep crisis, suffering hours-long electricity blackouts, miles-long queues for petrol, a shortage of gas canisters, civil unrest and a newly spawned terrorist group in northern Sinai, then known as Ansar Beit Al-Maqdis.
Unfortunately, the air of optimism sparked by the opening of the Suez Canal extension in August 2015, together with the announcement of a new capital city, was suffocated by the downing of a Russian passenger jet for which Ansar Beit Al-Maqdis — now renamed Sinai State, and affiliated with Daesh — took credit.
Britain started the ball rolling on a spate of flight suspensions that decimated Egypt’s tourism industry, causing major job losses and closures. Whereas most European countries reinstated flights long ago, despite the government’s efforts to tighten airport security, Egypt’s supposed allies the UK and Russia have offered only promises.
Due to the unprecedented treatment being meted out to a state victim of terrorism deserving of sympathy and assistance, it is not surprising that many Egyptians believe there are political motivations at play. Nevertheless, in December tourist arrivals were 25 percent greater than during the same month the previous year, bolstered by Chinese and Japanese visitors.
A recent statement by Egypt’s Foreign Ministry, coinciding with a visit to Cairo by the UK’s Foreign Secretary Boris Johnson, read: “The continuation of the halt of the British airlines to the Egyptian tourist destinations despite the progress that has been made in securing airports is completely not understandable and unjustified.” The statement added that the suspension was “inconsistent with Britain’s repeated promises to support Egypt.”
It has been an uphill struggle for a government tasked with caring for the needs of a population close to 100 million. But there is light at the end of the tunnel thanks largely to the country’s implementation of reforms — a reduction of energy subsidies, increased taxation and the liberalizing of the exchange rate — upon which a $12 billion International Monetary Fund (IMF) loan was conditional.
Previous presidents have been aware of the necessity to make changes but have balked at taking decisions, fearing a backlash similar to the 1977 bread riots.
Linda S. Heard
Those reforms are painful but long overdue. Previous presidents have been aware of the necessity to make changes but have balked at taking decisions, fearing a backlash similar to the 1977 bread riots.
The flotation of the Egyptian pound was a historic move that has already borne fruit, even though the currency’s value was halved against the dollar almost overnight. Stocks have surged, the bourse has risen by 76 percent in a year, Egyptian Treasury bills have been over-subscribed, and recent weeks have seen the pound strengthening. Consumers who have been hit hard by inflation are counting on prices coming down.
Energy corporations are lining up to invest in Egypt’s oil and gas sector, which is expected to begin exporting gas in 2019 thanks to the discovery of the biggest Mediterranean offshore gas fields and other smaller fields. On the way is a much-needed new investment law that will make the investment climate more attractive by cutting red tape and guaranteeing investors’ right to repatriate funds.
The climate is changing on the geopolitical front too. The administration of former US President Barack Obama was on a different ideological page from Egypt, whereas his successor Donald Trump has promised closer ties and assistance with economic and national security challenges. The resumption of US-Egyptian military drills, curtailed by Obama, is a good omen. El-Sisi has been invited to visit the White House in March.
There are no quick fixes for what ails Egypt. The population, crying out for better education and health care, is being asked to show patience. There simply is not enough cash in the kitty right now. The government’s economic strategy is medium-to-long term.
According to PricewaterhouseCoopers, by 2050 Egypt’s economy could surpass Canada’s. Egypt — wealthy in natural resources, unlimited tourism potential and a vibrant business community — may surprise us yet.
• Linda S. Heard is an author and columnist specializing in Middle East affairs.