THE Egyptian government finalized a rescue austerity plan designed to qualify for the long-awaited US $ 4.8 billion loan from the International Monetary Fund (IMF), but the scheme seems unlikely to include several painful measures as the government wants to delay this until after the upcoming parliamentary elections set for April 22.

This politically motivated delay to help the fate of the ruling Muslim Brotherhood in the election and avoid triggering any more social unrest on the street than already what exists is not surprising. But the question is whether delays will help the economy given its current strained conditions marked by depleting foreign exchange reserves, declining tourism and investment flows, a limited supply of subsidized diesel fuel and fertilizer, rising unemployment and a nearly 14 percent depreciation of the local currency since the popular uprising in January 2011. The ruling party seems to be playing the short game, but no matter how politically understandable, the economy looks bound to suffer.

The IMF loan was agreed in principle in November but was postponed till December at Egypt’s request because of a spike in political turmoil. The IMF was not happy, but betting on an improvement in political situation, it eventually said it had been analyzing the data provided by the Egyptians and should discuss the next steps with authorities after completing the study.

The two biggest challenges, which might hinder the economy plan and a proper use of the IMF funds whenever they come, are rationalizing subsidies and imposing structural tax reforms. Both elements will have very complicated social consequences in the near term and the government should not be surprised. The government knows very well it is not easy to convince people after the popular uprising that toppled Hosni Mubarak in January 2011 to accept price increases at any cost, even if necessary. The uprising meant for many Egyptians an opportunity to improve their standards of living and to avoid additional burdens. But, at the same time, the government cannot take the risk of not going for the assistance and knows the loan will open doors to billions of dollars of further assistance from international lenders.

For now, delay seems to be the watchword. The government decided to delay up till July, from April, the plan to rationalize the use of subsidized fuel through a system of smart cards. The subsided fuel bill swallows as much as a quarter of the state budget and cost EGP 55 billion in H1 of FY 2012/13 alone, but higher fuel prices are expected to raise this to EGP 120 billion. The first step to cut the energy bill was made late last year, when the government eliminated subsidies on 95-octane gasoline, the highest grade available. The move prompted many motorists simply to switch to subsidized lower-octane fuel. People have been angry, and the unrest seemed never to stop. It became no strange to say daily  quarrels between people in gas stations.

The other challenge, and may be the harder one, was the necessity to impose tax hikes that will push up prices. When people first heard of such plan, they resisted, in part violently. The violence, which accompanied the constitution referendum in late December, led President Muhammad Mursi to halt such increases.

But the price increases will have to come sooner or later. Not only that, increases will not just be small, as some officials claim, given the ongoing depreciation of the local currency against the US dollar, which made imports more costly.

Given the widespread social unrest and new calls for civil disobedience, the government decided to avoid anger by splitting the tax increases into two stages: The first sees tariff and tax increase on luxury products before the elections and the second is to witness increases on other commodities, including the main ones, after the elections. In addition, the government tried to make some parts of the reform plan appears more popular. The minimum monthly salary eligible for income tax exemptions was thus raised to EGP 12,000 from EGP 9,000 starting from October, in a bid to alleviate the tax burden on an additional 2.5 million Egyptian families. Those were the flavors.

The reform process seemed like a critical surgical operation that the government is doing, there will be some pain in the aftermath of the operation, but the authorities bet the pain would eventually result in a quicker recovery and a better living. The response of the patient might be aggressive, but the regime will not have to respond by a similar aggression than to aware the patient and keep up his spirit while understanding his fears. There should be continuous campaigns, workshops and media programs to explain every single measure to the citizen and its implications. Being transparent will build trust. It is that simple.

For the ruling party, it seems to accept the economic reform plan based on the new implementation dates, but the question remains whether these will satisfy the IMF. It seems very plausible that the IMF won’t agree to a loan deal until it ties it to the imposition of difficult but needed reform measures.

• Hatem Y. Ezz Eldin is a political researcher based in Jeddah. He can be reached at [email protected]