The economic challenges facing Egypt and its new President Abdel Fattah El-Sissi cannot be underestimated. Custodian of the Two Holy Mosques King Abdullah made this perfectly clear this week when he congratulated El-Sissi on his “historic” electoral triumph.
The king has therefore called for a donor conference at which financial pledges can be made to support Egypt as it grapples with a financial crisis born of two years of revolution and social and economic disruption.
The all-important tourist industry is in ruins. Foreign investor’s confidence, so crucial to attract inward investment has slumped. Ten years ago Egypt was emerging as the “go-to” destination for many international firms looking for a business base that would give them access to markets in both the Middle East and North Africa.
El-Sissi takes over at a time when the government finances are in a disastrous state. Leaving aside the need to finance a bloated state budget in Egyptian pounds, the country has urgent external financial needs. In the next half year it must find up to $9 billion in foreign currency to repay foreign loans. It will also need to make payments for imports, including wheat, oil and gas. Loan repayments could approach $14 billion next year.
The new president has also inherited a yawning gap in the country’s domestic finances. Egypt has long lived with fiscal imbalances but the problems now are serious. The government payroll suffers from gross over-employment, which in turn translates into extensive underemployment.
For instance the story has been told of the need to have lowly Central Bank officials sitting together in a distant office building in Nasser City each having to stamp a pile of fiches before a visitor could buy a copy of the Central Bank’s annual report.
With the tax income, never efficiently gathered, further reduced by the recent unrest and disruption, the government must struggle to fund itself.
The danger of inflation, currently running at around nine percent, is very real, not least because it will not only threaten middle class savings, but it will also have a disproportionate effect on millions of extremely poor Egyptians. The government then must resist the temptation to fund its way out of its problems by simply printing money.
With an economy that is to a large degree, still dead in the water, such commitments are daunting, to say the least. Hence the crucial importance of King Abdullah’s planned donor conference.
The Kingdom has already shown the way by pledging, along with the UAE and Kuwait, at least $12 billion.
The King made clear that the importance of fixing the Egyptian economy goes far beyond Egypt itself. He explained: “Causing any harm to Egypt is tantamount to harming Islam, Arabs and Saudi Arabia. This is a principle we are not prepared to bargain over.”
He is not alone in being concerned that part of Egypt’s present challenges have stemmed from outside influences. He urged countries around the world not to interfere in Egypt’s affairs.
King Abdullah said the Egyptian people had been suffering from the chaos and confusion that outside forces brought to the country. He called for firm steps to be taken to stop those trying to undermine the country’s security and stability. Any state that failed to halt those seeking to tear it apart, imperiled its honor and its dignity, he said.
It was for this reason that the king said he was calling on all Egyptians to remain united. They should be vigilant and act responsibly, while enduring the current difficulties and hardships. He said that he was sure that by supporting their new president, the Egyptian people would be able to overcome the difficulties and obstacles that now faced them.
Indeed King Abdullah said that he was confident that ultimately Egypt would get itself back on course and achieve great things, making itself “ the envy of the world.” But he warned that President El-Sissi faced many difficult tasks, needing to overcome falsehood through justice and truth. He went on to counsel that the new president should have an open mind about the views of others. It was imperative he said, to start a national dialog with all parties in Egypt whose hands had not been tainted with the blood of innocent people.
“A country or nation that fails to stop those who work for its disunity will not be able to protect its honor and prestige,” the king said.
Egypt deserves all-out support
