Protests continue on the streets in Egypt, as supporters of the Muslim Brotherhood and former President Morsi are clashing with the police and military. Government authorities threatened to forcibly clear two large protest camps in Cairo, while Senators McCain and Graham, on a visit to the country, urged restraint. But all of this continues to be just a prelude to the big issue: Egypt’s chronic economic problems. These will have a much greater effect on Egypt’s long-term stability than anything that happens on the streets this week.The military appears to be aware of this. As the Financial Times reports, Egypt’s military-backed government is looking to introduce a “raft of short-term measures” in order to breathe life back into the country’s sinking economy. The real priority, though, is for the country to secure access to an IMF loan originally negotiated by Morsi. The Muslim Brotherhood failed to deliver the reforms required by the IMF, and the new regime may also have difficulty selling change to the people. According to Deputy Prime Minister for Economic Affairs Ziad Bahaa-Eldin:
“Our target of the next few months is to engage with Egyptian society in getting everybody to understand better the state of the economy, what are the constraints, what are the options and therefore what are the choices available to us to make,” he said. “I don’t think the attitude of concluding an IMF agreement and then presenting it as a fait accompli is one that public opinion accepts anywhere in the world any more.” […]The interim government realises that foreign investment will hinge primarily on international confidence in Egypt’s progress towards democracy following the army’s ouster of Mr Morsi, Mr Bahaa-Eldin said. It plans to implement a political road map over six to nine months which includes amending the constitution, electing a new parliament and a president.
While securing foreign aid (including this IMF loan) will be important, figuring out some kind of formula by which the military can make its critics abroad happy about an IMF deal seems like a smaller problem than introducing the economic reforms that the IMF wants in exchange for the money. The FT may be overstating the willingness of foreign governments to play a game of financial chicken with Egypt over democracy. While the West may wring its collective hands over domestic issues in Egypt, not many people seem willing right now to push Egypt into bankruptcy and chaos over politics.Through all the street violence and protests in Egypt, it’s important to keep an eye on the key issue: economic reform. Stability will be a key. Constant reports of riots and demonstrations in Cairo do little to lure foreign tourists and their money back to Egypt. Quelling unrest is just the start, though. If—and it is a very big if—the military and the civilian leadership are willing to work together to deliver serious economic reforms in exchange for IMF funding, and if other donors continue to cooperate, then, and only then, does a path forward for Egypt become possible.