Egyptians concerned over state of economy

Looking down from each and every lamppost on the road from Cairo’s airport to the city centre is the benign visage of Abdel Fattah al-Sisi, neither smiling nor sad, neither easygoing nor stern. Reassuring.

The posters have been put up by his campaign although his victory is assured. His rival Hamdeen Sabahi has no chance but is putting up a good fight before Egypt's voters go to the polls next week in the second presidential election since the 2011 expulsion of 30-year president Hosni Mubarak.

This election is not a contest but a popular consultation being conducted under a new constitution approved by referendum last January, a consultation to confer legitimacy on the system of governance established after the overthrow last July of democratically elected president Mohamed Morsi, a Muslim Brotherhood stalwart, after he had served just one year of his four-year term.

Burning issues The burning issues this time round are the economy and security which are intertwined. At present, inflation is running at 12 per cent but the cost of fruit and vegetables has risen by 25 per cent over the past year, impacting every family. The country's growth rate stands at 1.25-1.5 per cent but the population is growing at 2.6 per cent a year. Unemployment is 14 per cent but twice that figure among youth.

Tourism, once a major foreign exchange earner, has fallen to $5.8 billion (€4.2 billion) from $12.5 billion in 2010. International investment is down to $2 billion from $12 billion. Domestic debt is $236 billion and foreign debt $45 billion. The budget deficit is 13 per cent of GDP.

Foreign currency reserves are an unhealthy $17 billion, down from $35 billion three years ago. The situation could be catastrophic if $13 billion had not been pumped into the economy by Saudi Arabia and the United Arab Emirates to cover essential imports of food and fuel. Energy internationals are reluctant to supply Egypt because it cannot pay. Power cuts could become a major problem during the sweltering summer months.

Mr Sabahi, a secular leftist, has a detailed 68-page platform which few Egyptians will study. Former army chief Mr Sisi does not have a platform but speaks of a “Marshall Plan” which he promises will improve the lives of his countrymen in two years time. This plan is expected to be financed by Saudi Arabia and the Gulf Emirates. Egypt is too big to fail on the economic plane.

The plan includes expanding Egypt’s area of habitation from the 6-7 per cent of the land along the Nile River and in the Delta, creating new agricultural land, building a million houses, providing jobs, and encouraging investment. It is also planned to rationalise subsidies on food and fuel without cutting them at the expense of the poor, who account for 40 per cent of Egypt’s population of 83-90 million.

The fuel subsidy alone cost $28.5 billion, one fifth of budget. Mr Sisi said: “You can’t get rid of subsidies all at once. People won’t tolerate it. We need to improve people’s living standards first.”

Business consultant Angus Blair, chairman of Signet Institute, says the situation is not as bleak as it appears, “The economy has grown every quarter but one during the three-year crisis.”

Government 'incompetent' The Brotherhood-led government consisted of "incompetent people making incompetent decisions". He warns there will be a difference between "what the new president intends and what he can do. He will have to make a cabinet reshuffle, keeping finance minister Hany Kadry Dimian.

“Egypt has different strengths than Europe. Household debt is below 10 per cent; private sector debt is 18 per cent. In the UK the former is 100 per cent and the latter 300 per cent. Egypt’s informal economy is healthy and external remittances amount to $18 billion.”

Blair argues that the new government must change people’s “sentiments.” To so this, it must “use Egypt’s resources for development not subsidies” to which Egyptians cling.

Signet Institute economist Mustafa Bassiouny who took his MA at UCD says, “The main question is how to rationalise the subsidies” so that the poor are not harmed. “Some steps have been taken by the current government but they are not substantial.”

Changing sentiment Blair states, “The honeymoon period [of the new president] is going to be critical in changing people’s sentiments. “He will have a window of opportunity to do something. But it will be a short period. He must make a very good start to show people that change is possible.”

Bassiouny adds that during this time the president “will be in charge of the cabinet [which under the constitution should be] created by parliament but there is no time table for a parliamentary poll.”