The economic collapse in Egypt

All economic indicators in Egypt point to the fact that we have begun the phase of a real economic collapse in Egypt, which Egypt will pay for for many years to come and which will have an impact on the largest proportion of its people.

The indicators from the Egyptian Exchange show that it has lost 30 per cent within two years and 27 billion Egyptian pounds ($3.4 billion) within only two weeks. Egypt’s feeble exchange is expected to continue its nosedive as of today which may also see a wave of decline in world markets.

The currency reserve in Egypt reached its worst levels after Egypt received nearly $50 billion since the coup in July 2013. All these funds have been squandered. Only about $16.4 billion remain and these are not sufficient for covering the importation of basic commodities for two months.

Abdel Fatah Al-Sisi, the traitor and leader of the coup, needs $1.5 billion a month in order to remain in power. This is becoming increasingly hard to meet by donor countries in view of the tough global economic circumstances. Even if these countries were to continue to provide minimum support, this will not stop the economic decline that is felt by the citizens in Egypt.

Exports have fallen by 25 per cent. The export of petroleum products has fallen by 19 per cent compared to what it was during the same period of last year. This can only happen if there is real failure by the authority and when this authority wages war on the private sector, let alone monopolising all government tenders and shutting the door completely in the face of smaller contractors.

The despotic authority was not content with just that over the past two years. It has fought against all the activities of the parallel economy, which represents about 30 per cent of the overall economy. The war has taken different forms in order to push the private businesses into the official market so as to reap taxes from these small workshops and what may be likened to them of small unofficial activities. As a result, tens of thousands have lost their seasonal jobs, which used to serve around five million people in Egypt.

The business sector in Egypt, where more than 300,000 Egyptians work, is going through its worst time. It is a sick sector. It has suffered from power shortages or from a reduction in natural gas or from non-approval of the funding it needs in order to renew some of the necessary machinary and tools. Consequently, the sector has gone from bad to worse as a result of a rotten plan drawn up by the coup government with the aim of sacrificing these vital companies and benefiting from their cheap price or the cheap prices of the properties owned by them. A notable example of this is the Steel Factory, the Najaa Hammadi Aluminium Factory and Al-Mahallah Textile Factory.

We stand at the threshold of a real collapse in the value of the pound, which has already lost 20 per cent of its value over the past two years. The corrupt government continues to insist on collecting money from the Egyptians, either by failed projects, such as the Suez Canal water way extension project, or by putting up interest rates on saving certificates reaching up to 12.5 per cent, and that are likely to rise further in the future. Therefore, sane individuals should stay away and shield themselves against the exploitation of these corrupt governments and this regime that hates the country and is squandering its resources.

As for the projects labelled by the coup government as giant projects, they have all, without exception, either been cancelled or failed. Take for example the Suez Canal expansion project for which $8 billion were collected from the citizens and for which a mandatory $1 billion of interest will have to be paid annually. Add on top of that the canal’s loss of 9.7 per cent of its revenues due to the negative impact suffered by world trade more recently. In other words, the Suez Canal project will, as of this year, bring in a revenue of $3.5 billion only compared to $5 billion in the years before.

This failure cannot be unrelated to another despotism in the complete absence of any legislative regulation or system of accountability. The traitor leader of the coup has bought $8 billion worth of weapons, some of which are partly funded by regional powers while some will be paid at a later stage by the citizen, either in the form of new taxes that will be levied or in terms of deductions taken from any expected aid.

As for tourism, this sector too has suffered another collapse upon the failure of the regime to protect it. There is the killing of 12 Mexicans and the killing of 220 tourists in the Russian plane crash as a result of what is obviously a security breach. Consequently, we have seen the beginning of a complete freeze in tourism in the most important location in Egypt and during the most crucial timing, which is the start of the main tourism season this year. Around two million Egyptian work in this sector, directly or indirectly, but more than eight million citizens will be affected during the coming days in the shadow of the failure of the coup government and its failing president in salvaging this important sector.

Finally… the banking system is no longer able to save the people’s money now due to the complete absence of the independence or transparency of the Central Bank, which will, undoubtedly, call its former governor to account, for concealing the tens of billions of dollars that reached Egypt let alone for his decision to ban the publication of any credible information about the currency reserve on time and for misguiding the public.

No one can save this collapsing regime that has squandered the wealth of the nation and the savings of the toiling citizens.

Yahya Hamid is the former minister of investment in Egypt. Translated from Arabi21, 16 November 2015

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.