Battle ahead in Egypt over impending austerity moves
CAIRO — Egypt's government is readying itself for the potential political fallout of impending austerity measures as it seeks to guarantee a badly needed $4.8 billion loan from the International Monetary Fund next month.
As the Egyptian pound hit a low on Sunday, Egyptian Prime Minister Hesham Kandil told reporters that the loan might be the only way out of Egypt's economic crisis.
Kandil made his comments one day after Egypt's central bank implemented a system of buying and selling dollars, which it said would slow the depletion of the country's dwindling foreign currency reserves. Egypt is contending with a rising budget deficit and mounting public frustration, two years after the popular overthrow of Hosni Mubarak on demands of more jobs, economic equality and social justice.
In a speech Saturday before the upper house of parliament, President Mohamed Morsy urged Egyptians to accept coming reforms and get on board with “stability” upon a month of political unrest.
But the reforms will be no easy sell. Economists say there will be little gain without pain in the Arab world's largest country, where about 40 percent of the population lives on less than $2 a day.
And many say the government is running out of time. Political turmoil since Mubarak's ouster two years ago has caused revenues from tourism and foreign investment to plummet. Egypt has more than halved its foreign currency reserves to keep up with debt and budget obligations.
Egyptian officials say they are on track to sign the IMF loan by the end of January. But meeting the IMF's expectations in the weeks ahead will be no less challenging than they were earlier this month, when preliminary plans to sign the deal were derailed by political unrest.
An attempt to introduce spending cuts and tax reforms amid the crisis was almost immediately shelved, underscoring the disorder that the government's critics, and even some of its officials, say has prevailed at the upper ranks of Egypt's recently elected Islamist government.
“We need to explain the economic facts to the people, and we need to explain that these measures⅜will spare the poor and will only affect the rich,” said Mohamed Gouda, who heads the economic committee of the Muslim Brotherhood's Freedom and Justice Party. “If we can convey that, then the people will cooperate with any procedures that we take.”