Egyptian economy falls into distress
CAIRO — The official approval of Egypt's disputed Islamist-backed constitution on Tuesday held out little hope of stabilizing the country after two years of turmoil, and Islamist President Mohamed Morsy may face a more immediate crisis with the economy falling deeper into distress.
In a clear sign of anxiety over the economy, the turbulence of the past month and expected austerity measures ahead are spurring some Egyptians to hoard dollars for fear the currency is about to take a significant turn for the weaker.
The battle over the constitution left Egypt deeply polarized at a time when the government is increasingly cash-strapped. Supporters of the charter campaigned for it on the grounds that it will lead to stability, improve the grip of Morsy and his allies on state institutions, restore investor confidence and bring back tourists.
“In times of change, politics are the driver of the economy and not the other way around,” said Mourad Aly, a media adviser for the political arm of the fundamentalist Muslim Brotherhood, the backbone of Morsy's presidency and the main group that backed the constitution.
Morsy signed a decree Tuesday night that put the constitution into effect after the election commission announced the official results of the referendum held over the past two weekends. It said the constitution passed with a 63.8 percent “yes” vote.
Turnout of 32.9 percent of Egypt's nearly 52 million registered voters was lower than most other elections since the uprising nearly two years ago that ousted authoritarian leader Hosni Mubarak.
The U.S. State Department bluntly told Morsy now was the time to make compromises.
“President Morsy, as the democratically elected leader of Egypt, has a special responsibility to move forward in a way that recognizes the urgent need to bridge divisions, build trust and broaden support for the political process,” said Patrick Ventrell, acting deputy spokesman. “We hope those Egyptians disappointed by the result will seek more and deeper engagement.”
But there are already multiple fights on the horizon.
Morsy is expected to call for a new election of parliament's lawmaking lower house within two months.
In the meantime, the traditionally toothless upper house, the Shura Council, will hold legislative power. But the chamber is overwhelmingly Islamist-dominated, so any laws it passes could spark a backlash from the opposition. Many fear a legal crackdown on independent media.
The leader of the Muslim Brotherhood said he hoped the charter will be a “good omen” for Egyptians.
“Let's all begin to build the renaissance of our country with free will, good intentions and strong determination, men, women, Muslims and Christians,” Mohammed Badie said on his Twitter account.
But the opposition said the passing of the document is not the end of the political dispute.
“This is not a constitution that will last for a long time,” said Khaled Dawoud, a spokesman for the main opposition group, the National Salvation Front. “We want stability and economic prosperity like everybody else. But we don't believe that the policies of Morsy and the Brotherhood will lead to more stability.”
The turmoil over the constitution sparked huge protests, some of which turned deadly. At times, the tension appeared to be spiraling out of control and only added to an already weakened economy.
At the height of the protests, the government called off talks with the International Monetary Fund over a $4.8 billion loan that Morsy's government viewed as a way to attract foreign investors and deal with a high budget deficit.
Major foreign currency earners, such as foreign direct investment and tourism, have dropped off because of political unrest and deterioration in security following Mubarak's ouster in February 2011.
Over the last two years, the country has lost more than half of its foreign currency reserves, dropping from $36 billion in 2010 to about $15 billion. The reserve level has been propped up by some Qatari deposits in past months.
Economic experts say that Egypt's foreign reserves barely cover three months of imports, which is the IMF's minimum recommended coverage.
There were signs on Tuesday that some Egyptians were starting to hoard dollars for fear that the local currency could weaken significantly.
The run on the dollar was fueled in part by a decree issued by Morsy late Monday banning people from leaving Egypt with more than $10,000 or its equivalent in other currencies.