The American Interest
Analysis by Walter Russell Mead & Staff
Nation in Distress: Egyptian Pound Plummets

Egyptians are quickly losing the hopeful optimism that once fueled the revolution, as the economy deteriorates, dissatisfaction with the Brotherhood government grows, and security is still questionable.

$4.8 billion loan from the IMF depends on President Mohamed Morsi’s willingness to impose austerity measures, a move which could tip the scales into civil disorder, as Reuters reports:

With their patience already stretched after years of upheaval, Egyptians—from the capital Cairo to smaller towns like Zagazig—appear to be nearing the point where discontent could explode into a new wave of unrest.

“There is no security. There is nothing,” said Soheir Abdel Moneim, a retired school teacher, as she hurried through an open-air market in Zagazig [a city northeast of Cairo] in search of vegetables she could afford.

“The pound is falling. Everything is more expensive. Is there anything that has not become more expensive?” she asked with a shrug, as traders on bicycles loaded with their wares dodged through the chaos of the market.”

The Egyptian economy fell into disarray when Morsi, fearing a public backlash against the terms and conditions, initially postponed the IMF deal. The Egyptian pound crashed and foreign reserves ran out, driving up prices for basic goods. As the pound continues to fall, Qatar has offered something of a band-aid in the form of a $2.5 billion loan, but real stability depends on IMF involvement.

If Morsi agrees to the tax hikes and spending cuts necessary to secure the loan, it would hit at the subsidies that many Egyptians rely on to survive. Whether this will cause them to take up liberal revolutionary ideals once again or drive them into the arms of the Salafis is anyone’s guess.

What is clear is that Morsi and his government don’t have the answers. The Muslim Brothers have spent most of their short time in government settling old scores and consolidating their grip on power instead of making allies and moving the country forward. Via Meadia will be watching over the next few weeks with interest.

Published on January 10, 2013 7:00 pm