The political turmoil in Egypt during the Arab
Spring resulted into an escape of foreign capital and investment and as a
result, the Egyptian pound has already lost one tenth of its value since the beginning
of 2013. This escape in foreign capital increases interest rates in Egypt and
decreased exports, requiring from Egypt serious and urgent economic reforms so
that the political leadership can increase its approval rate and to improve
overseas confidence, in order to improve investment and exports rates. Since usually loans from the IMF are provided
only with certain conditions, analysts expect that Egyptian government will
have to approve austerity measures such as tax rises, cuts to fuel and bread
subsidies, on top of the cuts already in place for food and fuel imports (due
to lack of funds and high inflation), which have sparked protests. Social
unrest helped in reducing the number of tourists (a vital industry in Egypt),
which further increased pressure on political leadership “to construct a plan
which would build domestic confidence, investment and economic growth."
Politicians with seemingly autocratic intentions, such as President Mursi are
also not helping the situation. By creating conflicts between the leading party
(the Muslim Brotherhood) and the opposition, the IMF has already cancelled and
aid package that was due in November, delaying even further economic help for
the people who really need a large economic boost in Egypt to succeed in their
business. In order to provide an interval for these deep-seated problems, Egyptian
political leadership should stop pursuing self interest in consolidating power
and reach across the table for economic liberalization and further
democratization of its institutions.
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