Egypt’s economy tumbles on eve of revolution anniversary

(Originally published by Blouin News)

It was inevitable that a visiting delegation of U.S. senators in Cairo on Wednesday would chastise President Mohammed Morsi for recently rediscovered comments, made in 2010, in which he described Zionists as “descendants of apes and pigs” who sow chaos wherever they appear in history.

But it was telling that the Americans let Morsi’s pre-electoral anti-Semitism off with less than a slap on the wrist — declining even to ask for an apology — while coming down as blunt as a hammer on the economy he now oversees.

“The Egyptian economy is going to collapse if something is not done quickly,” Senator Lindsay Graham said.

“It’s hard to have democracy when people aren’t eating,” added Senator John McCain, who said the country needed aid “urgently” — including $489 million yet to be dispersed by the United States.

In less than a week, Egypt will mark the two-year anniversary of its revolution. A day later, on January 26, angry youth will await a court ruling on the deaths of more than 70 soccer fans last February in the country’s worst-ever sports disaster. The stage is set for another round of public fury against Morsi and his Muslim Brotherhood-led government.

Such an outburst of instability is the last thing Morsi needs, with an economy and a currency wobbling nervously close to collapse, but his administration has done little to avoid it.

A train crash in November that left 51 people dead, most of them schoolchildren, led to the transportation minister’s resignation, but was followed by another disaster this month that killed 19 military conscripts. Instead of investing what analysts say is a necessary minimum of around $70 million to improve rail infrastructure, the government is seen working to expand its state media empire.

Though Morsi’s government isn’t doing itself any favors, the tightrope it’s being forced to walk is close to impossibly thin. Billions of dollars already loaned by Qatar and pledged by the European Union are not enough when at least half is sucked immediately into the central bank’s depleted reserves. Households, taxi drivers and landlords have all begun hoarding dollars, with the Egyptian pound expected to slide significantly further past its current 6.4 exchange rate.

“Devaluation is coming, and we’re not in a position to reap the benefits,” warned Citadel Capital chairman Ahmed Heikal at an American Chamber of Commerce conference last week.

Egypt needs a $4.8 billion IMF loan that has been stalled for months, less for the money than for the implied confidence, an essential requirement for the return of foreign investment and resumption of domestic businesses. Speaking to the conference attendees in a swank Four Seasons hall, Prime Minister Hisham Qandil said that his investment minister had recently toured London to drum up foreign investment and reassure the Britons that Egypt was working “day and night, up and down” to improve liquidity.

But Morsi faces obstacles all along the way. Egypt needs to rely on the private sector to generate the 700,000 jobs a year required for growth, according to the World Bank. The IMF deal, with its aura of foreign domination and austerity requirements, is unpopular in Egypt, especially among the vocal leftists who will be competing with Morsi’s Freedom and Justice Party in April’s pivotal parliamentary election. And even if the deal is secured, there’s no guarantee investors will rush back to Egypt, especially as the rest of the word has its own austerity measures to swallow.  As Lindsay Graham succinctly put it, it’s “very difficult” to convince U.S. taxpayers to agree to foreign aid these days, “because we’re so broke.”