In the year since President Hosni Mubarak was ousted, Egypt has faced many challenges: the military-led government’s brutality against protesters and pro-democracy groups, its resistance to handing power to civilian leaders and the rise of Islamists in the country’s first free elections. Now worsening economic conditions are further sabotaging hopes for a democratic future.
The country’s foreign currency reserves have fallen from a peak of $36 billion to about $10 billion and could run out entirely by March. The currency is under severe pressure, and a steep drop in the exchange rate could bring painful inflation and more social unrest. Youth unemployment is about 25 percent, a dangerous situation where 60 percent of the citizens are 30 and under.
Egyptians want jobs, education and a say in governance. Many are justifiably angry about the military’s autocratic control — and will be angrier still if economic conditions deteriorate further. They aren’t the only ones with a stake in the outcome. Egypt is the fourth-largest economy in the Middle East. Its success, or failure, will have a huge impact on the region and beyond.
Egypt’s military rulers are now realizing how big a threat the collapsing economy is — and they clearly don’t want to be blamed. In May, they rejected a $3.2 billion loan from the International Monetary Fund, saying it would infringe on Egypt’s sovereignty. They wanted the money, but with no strings attached — no mandatory reforms or austerity measures, like cutting food and fuel subsidies. Now desperate, they resurrected the loan request this week and welcomed an I.M.F. delegation to discuss possible components of an economic program. The I.M.F. probably won’t make a decision on that request until March.
The fund’s officials say that they do not intend to impose conditions on the loan. But even without conditions, Egypt must make reforms if it wants to spur private business ventures, foreign investment and growth. Such measures can never be sustained without public support.
In a recent interview with Reuters news service, the leader of the Muslim Brotherhood’s economic committee, Ashraf Badr el-Din, suggested that the Brotherhood and other main parties are moving toward consensus on managing the economy. If true, that’s a good sign. The United States, the European Union and the gulf states last year promised billions of dollars in assistance to Egypt, but most of it has not materialized as they waited for signs of political stability. If the I.M.F. negotiations over the loan terms succeed, those countries should move quickly on their commitments, including offers to begin free-trade talks with Egypt.
Washington and its allies may not have much sway with the military rulers or the newly elected political leaders in the short term, but they have to build long-term relationships with all segments of civil society. Some say Egypt could be one of the world’s top 10 economies in a generation. [This remark is ridiculous. Why does the Times call its own editorial, its own understanding of Egyptian reality -- Egypt is sinking economically, and nothing can stop it -- into question by even repeating - with that comically vague "some say" by way of authority -- such an absurdity?]That’s a goal worth working toward.