A few days ago I told a Tunisian friend who just arrived some stories about the Egyptian political scene. She listened to me intently while suppressing her laughter, and after I was finished her only comment was: “Cheap Drama..You guys are living in a cheap drama.” I have found her comment not only a fantastic summary of the events that have led us to this point, but also a perfect summary of our current situation. You know you are living a cheap drama when the most important activist in your country is a comedian hosting a satire show, and the only economic plan your government has is an IMF loan. Yes, it’s that bad.
I have written against Egypt getting the IMF loan extensively, but my opposition to it wasn’t based on any ideological principle as much as it was concerns regarding its effectiveness as an economic remedy to our current situation. The majority of the discourse against it plays up the austerity measures and the conditions, while the reality of the situation is that the conditions and austerity measures were not imposed by the IMF, but proposed by the Egyptian Finance Ministry. The only condition that the IMF had was for Egypt to simply stick to its adjustment plans. That being said, the IMF, the ministry of finance, and anyone who works in the Egyptian market knows that the IMF loan will not improve the Egyptian economy one little bit.
Let’s go over what that IMF money, or the billions it will supposedly unlock, will do exactly: it will finance our government’s operation. That’s it. It will not jumpstart or stabilise the economy, it will not resolve our foreign currency crisis, it will not have much impact on our economic problems. Hell, the money, when it comes, will not even stay in Egypt for long. It will be used immediately to finance the government and allow it to purchase wheat and fuel to meet our needs in the short-term. In the long term, and by that I mean any time after the summer, we will continue to face the same crisis, because that money will not resolve our real problem.
The real problem lies in the private sector, and specifically the multitude of economic sectors and thousands of companies and factories that rely heavily on imports for their products and revenue. In order for them to import their goods, they need the banks to allow them simply to transfer dollars abroad to pay for their suppliers. Given that there is a huge shortage of dollars in the banks, and limitations on the amounts transferred and what transfers can be used to purchase, literally thousands of Egyptian businesses and factories are now in danger of going bankrupt.
The ones that will survive longer are the local branches or partners of multinational companies, who can technically work things out internally and not for long. But Egyptian businesses? They are slowly but surely dying, their owners are going bankrupt, and if and when they close, the consequences will be horrific for the already dying economy and the population. A small example of this would be local pharmaceutical companies , who, due to being unable to import certain chemical compounds, are unable to produce or sell their drugs, immediately affecting their continued financial survival and the actual survival of the millions who need their medicines. Have you noticed how many items have been disappearing from pharmacies over the past few months? If not, go and ask.
So, how do we get dollars? Well, we used to get them in a number of ways, but mainly through tourism and foreign investments, and those two are gone now and unlikely to come back to Egypt anytime soon. Why? Well, because any foreign investor who has monitored the MB government’s performance in the past 9 months would be out of his/her mind to invest here. He could invest in lands and wake up one day to find the government trying to seize the land or claiming it to be undervalued and wanting more money for it, like they did with Al Futaim; or he could wake up, find that the government has passed a new tax law and is trying to implement it retroactively, like they did with the Sawiris family; and if he decides, at any minute, that the environment is too hostile for him to work, this investor will find that he can’t get his money out of the country, because the government will not allow the money to leave the country, as it’s doing now. What’s worse is that there is no more rule of law or legal recourse that will be respected, also thanks to the Morsi government and its illegal Prosecutor General. Why would an investor come here?
As for tourism, well, in general tourists do not like Islamists, given their long history of them trying to kill tourists or kidnap them when they were not in power. But if we ignore that, we find tourists have very little reasons to come: there is no security, and despite what you may believe they are not clamouring to be sexually assaulted in Cairo or kidnapped in Sinai. On top of that, you have even more extreme Islamists, who are now in the habit of protesting against tourists from specific countries, like they did with Iranian tourists, who happened to be people while being Shi’a. The government, for its part, stood firmly against such protests for exactly two days, and then cancelled the future flights coming in from Iran. I personally cannot wait till we have Salafis protesting against Indian tourists on the account that they worship cows.
So, where do we go from here? Well, the Egyptian Central Bank is doing what it can to remedy the situation, but even they know that a currency auction like the one they did yesterday will only clear a little of the backlog, will only benefit certain industries, and will bring down the price of the dollar only temporarily. The dollar will rise again, and the economic situation will continue to deteriorate, until the problem is solved, and we get a government and a president who are actually interested in running a country. It’s one of life’s greatest ironies, that when Egypt finally gets run by the Muslim Brotherhood, a group of capitalist businessmen, they end up being this bad for business.