Egypt: Too Big, Too Late to Save?
With the world’s attention riveted on war-torn Syria, far too little attention has been focused on Egypt’s economic woes and their long-term implications for the region. Heavily dependent on food imports for survival, Egypt desperately needs cash, but its foreign currency reserves have been shrinking dramatically and without more external aid, it’s difficult to see how Egypt will manage to feed itself. In the end, Egypt may be too big and too late to save.
Earlier this month Qatar, Turkey, and Libya pledged a cash infusion of $6.2 billion so that Egypt could continue to purchase wheat, cooking oil, and other staples, but without a continuous flow of aid, it is hard to see how Egypt survives. For several months now Egypt has been attempting to negotiate a $4.8 billion loan from the International Monetary Fund, but Egypt’s negotiator just quit, leading outside observers to wonder whether it might take several more months to iron out an agreement with the IMF.
With a population of 82 million, Egypt has more people than Saudi Arabia, Jordan, Palestine, Syria, Lebanon, Libya, and the United Arab Emirates combined. Half or more of Egypt’s food, including its wheat, is imported. Egypt is also heavily dependent on diesel imports to transport its food and run its agriculture machinery.
For years, Egypt has relied heavily upon tourism to pay the bills, but unless political stability is restored, it has no hope of bringing the tourists back. And without a healthier economy, there’s no end in sight to the political unrest.
Egypt’s poor and middle class are heavily dependent on government food and fuel subsidies for their economic survival. Believing — and correctly so — that the subsidies are wasteful and inefficient, the IMF is insisting that the government agree to trim them. Doing so, however, would almost certainly fuel widespread protests and further undermine the government. It’s a colossal Catch 22.
Given sufficient time and aid, Egypt might be able to muddle through for some years to come, but time may be running out and when it does, so will the aid. The IMF is not an international relief agency; it expects its loans to be repaid. Without a reasonable prospect of repayment, the IMF will not extend credit, and neither will many other international lenders.
Egypt is not just food dependent, it is young and poor. One-third of its population is under the age of 15, and, by some estimates, as many as 40 percent of Egyptians are living on less than $2 a day. Egypt’s population growth rate, unfortunately, makes it highly unlikely that it will turn the corner on food dependency and poverty anytime soon. In 13 years or less, Egypt’s population, currently 82 million, is projected to reach 102 million, and by 2050, 135 million.
To read the full essay, please click here: http://www.huffingtonpost.com/robert-walker/egypt-too-big-too-late-to_b_3178979.html
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