The new Islamist Egypt has a number of problems, but the biggest one is that it's starving to death, because it has a population of $80 million it can't feed.
As I reported earlier, Egypt is being forced into a choice of starvation or bankruptcy:
In Egypt, in Syria, in Jordan, in Tunisia, the Arab autocrats survived by providing subsidies to their populations for food, cooking oil and other staples.Last year, when the price of cereal grains and other staples almost doubled, the subsidies simply weren't affordable any more.
When this happened in the past, the brunt was born by Asians in places like India and China. Now, with those economies expanding rapidly, the Arabs are simply being outbid and are the lowest on the food chain.{...}
Tourism, once a major source of income is severely curtailed after the reports on rapes and assaults of both locals and foreigners in places like Tahrir Square.The new Egyptian law that allows 'citizen's arrests' of foreigners is killing most of what's left.
The only part of the tourist trade that survives is sex tourism from the Arab world. That's not an attraction for westerners in view of the other risks involved in simply visiting a country that the World Economic Forum ranked lowest out of 140 countries for safety and security.Nor does it provide anything like the old revenues.
Egyptian cotton is being underbid on the world markets by countries in Central, South and East Asia, foreign investment is almost non-existent, and the gas Israel used to buy from Egypt is no longer in the picture because of sabotage of the pipeline and public outrage in Egypt against any trade at all with the Jews. Foreign aid and the fees Egypt gets from use of the Suez Canal aren't enough to make the nut.
The Islamist government had been basing its hopes on a desperately needed International Monetary Fund (IMF)loan, which would allow the Muslim Brotherhood government to pay subsidies again and give it some breathing space to get from point A to point B. Unfortunately, the IMF has other fish to fry at the moment, and is insisting on austerity cuts including cuts in the subsidies. At a time when EU countries are chafing under austerity cuts, it's politically difficult for the IMF to do anything else. And if Egypt agrees to that, they'll be facing massive civil disorder, as well as a major loss in credibility.
The Egyptian pound is in worse straits than the Iranian Rial, and no one wants it. It has lost 60% of its 2012 exchange value against the dollar, and Egypt's supply of foreign currency is down to about three months.
Egypt, once one of the richest countries in the world agriculturally is now the world's largest importer of whea,t which accounts for an estimated $32 billion trade deficit.
The price of fava beans has skyrocketed 40% this year. The average Egyptian lives on government subsidized bread, sugar and oil. And those subsidies are in jeopardy.
The Egyptian government is expected to be short by as much as 4 million tons of wheat imports this year. Essentially they've slashed orders because they simply don't have the hard currency needed to purchase them, and instead are overestimating the coming crop.
Last week, Libya and Qatar announced that they might be prepared to lend the Egyptian Muslim Brotherhood government around $5 billion. Unfortunately, Egypt already owes that amount to the foreign companies that produce its oil and gas, and the amount it owes already for oil and wheat imports almost certainly exceeds its cash reserves. Egypt is not a major player in gas or oil, and its doubtful production will continue unless the arrears are paid up.
Even if Libya and Qatar actually produced the money(especially doubtful in Libya's case)the money would probably only cover a month or two.
Another problem in Egypt is capital flight. Anyone who actually has any money is spiriting it out of the country, usually to the EU or the Emirates.
The Morsi government likely has about three months, tops before the country goes bankrupt. What they're likely doing is playing for time to try and get better terms from th eIMF and their creditors.
The Obama Administration's contribution to all this was $1 billion in debt forgiveness, and about $3 billion in military aid to Egypt over the last year and half in spite of congress' objections and a formal hold.Oh yes, and a shipment of 140,000 teargas canisters to help the Islamist government retain power when the inevitable protests start.
President Obama has a vested interest in seeing the Muslim Brotherhood regime he helped take power stay in power.Where that ends is anyone's guess.
No comments:
Post a Comment