Foreign investors are taking Abdel Fattah el-Sisi’s progress toward fiscal stability as a sign that it may be safe to start investing in Egypt once again. As the Financial Times reports:
The perception that political risk is diminishing is reawakening the interest of overseas and domestic investors in Egypt’s large market of 90m people.“The foreigners now see that there is stability. Whether they perceive it as stability based on repression or acceptance, they see stability,” said Wael Ziada, head of research at EFG-Hermes, the regional investment bank. “Investors also see the economy picking up steam, a big fiscal stimulus and more than $2bn of aid from the Gulf.”Energy shortages and a deficit of about 11 per cent of gross domestic product remain big concerns. However, Mr Sisi sent investors a positive signal in the summer when he announced plans to press ahead with slashing costly fuel subsidies – a move previous administrations have balked at for fear of provoking unrest.
Investors might be regaining confidence, but basic staples in Egypt remain so unaffordable as to threaten political stability. As Al Ahram detailed in an in-depth article at the end of August:
“Egypt relies on the global market for up to 60 per cent of its food needs,” the FDI study said. Whereas Egypt is self-sufficient in the production of most fruit, vegetables and livestock, it is unable to produce enough grains, sugar or vegetable oil — foods that make up a large part of the country’s diet — to feed its people, the FDI said.“We are among the countries listed by the FAO as suffering a serious gap of more than 55 per cent between food production and consumption,” [Nader] Noureddin [a professor of agricultural resources at Cairo University] said. This growing reliance on food imports makes Egypt “highly vulnerable to fluctuations in international food prices,” according to the FAO. Food prices are also expected to rise due to fuel subsidy reductions made by the government in July, according to a recent FAO statement.
The rallying cry of the two revolutions that toppled Mubarak and Morsi was “Bread, Freedom, and Social Justice.” El-Sisi’s pact with the Egyptian people is that if they relinquish some measure of freedom and social justice he can get them the “bread” by returning the country to stability. So far he has made progress through short-term loans from the Gulf, long-term fiscal reforms, and a campaign of political repression and violence.But if that progress doesn’t lower food prices, Egypt’s recent return to stability may prove illusive. If food insecurity were Egypt’s only problem, perhaps we could be more optimistic about its long-term prospects. But the state of the Egyptian economy as a whole leaves Egypt dangerously dependent on the whims of foreign investors and continued largesse from the Gulf.