The Middle East Policy Council just published a new briefing titled “Anxiety Grips Egypt’s Economy.” Co-written by this author, it addresses some of the systemic issues facing Egypt right now. Subsidy reform, the Central Bank’s struggle to manage currency devaluation, inflation, fuel shortages, black markets, and loan prospects are all covered. Perhaps most importantly, the article makes the case that the United States is not sworn to approve a $4.8 billion loan from the International Monetary Fund. This seems apparent now that the U.S. Ambassador has called on Egypt’s government to do more and act fast.
The IMF loan, negotiated last year and expected to be finalized last December, was delayed by drawn-out political crises in Egypt, which began in late November. It is still on hold today even though all parties recognize that it is absolutely necessary. (The IMF deal is now considered the ultimate stamp of approval by the international community. It could unleash an additional $14.5 billion in aid from other sources.)
The problem is leadership, which Cairo lacks. President Mohammad Morsi has thus far shown a perplexing willingness to consolidate power by decree and rush through political reforms by referendum. While, at the same time, he has refused to make tough decisions affecting Egypt’s economy ahead of parliamentary elections. He and his party–the Muslim Brotherhood’s Freedom and Justice Party or FJP–are clearly afraid of alienating voters, even though the value of the Egyptian pound falls to news lows every day and the poor stand to lose the most from steady inflation.
Take an extra moment and revisit our November 15 briefing for MEPC. That article (“Egypt’s Economy Looks to 2013“) was hopeful by comparison. Until that point, Morsi’s government had said all the right things; the IMF loan looked certain. But three short months have turned Egypt’s prospects upside down. A courageous leader needs to deliver an ambitious economic plan, campaign for it publicly, and–at the same time–protect Egypt’s most vulnerable.
Can Morsi be that leader?