A desperate shortage of foreign exchange is causing economic pain that’s beginning to threaten Egyptian President Abdel Fattah al-Sisi’s support. The New York Times reports:
After years of publicly lionizing Sisi as the savior of the nation, many of the country’s most influential figures have emerged to blame the president for an economy in crisis, an Islamist insurgency raging in the Sinai peninsula and the brutality of an unreformed police force.[..]
But perhaps more damaging for Sisi’s image has been the failure of the economy, despite his promises that life would get better now that he had ended the turmoil.
Sisi hails the building a new branch of the Suez Canal in a single year as a key achievement. But the project, built with $8 billion borrowed from the public at the height of his popularity, has so far failed to boost the country’s income.
Meanwhile, imported commodities such as cooking oil have been in short supply at outlets that offer subsidized goods to the poor, because a foreign exchange crisis has made it harder for state importers to secure regular supplies.
The government failed to replenish its stockpiles of rice, which is now mostly available only at the market price, far beyond what Egyptians are accustomed to paying.
Businesses complain of rising prices, falling profits and uncertainty over the fate of Egypt’s currency.
Correctly focusing on using foreign exchange to prop up the living standards of the poor, the Egyptian government is getting some complaints from the rich. That’s not a major problem; Egypt’s rich won’t benefit from the fall of the Sisi government, and they know that much too well to make serious trouble. Nevertheless, the strain on the treasury that results from the expensive subsidies for food, cooking oil, and so on for the poor is very real, and could have consequences.
Egypt has suffered some crippling blows from the collapse of its tourist industry, and it is thus suffering from a foreign currency shortage that, thus far, has been largely papered over by largesse from the Gulf. Low oil prices, however, are cutting into Gulf budgets, and there seems to be a growing realization that Egypt is an expensive friend—and that its financial problems are profound.
This is going to be a problem for the next American President. As bad as the Middle East situation now is, with Egypt in disarray the picture becomes much worse. The threat of instability and war moving closer to key zones of oil production and key transport routes like the Suez Canal could jack the price of oil up to crippling levels. Beyond that, the rise of an ISIS or Al Qaeda-like insurgency inside Egypt could send millions more refugees across the Mediterranean.
On the other hand, the Sisi government’s record on human rights is appalling, and it is far from clear that the government has developed workable strategies for national reconciliation or real economic development. Like many governments in the Middle East that have imposed order at the cost of long term political polarization and economic stagnation, Egypt’s current government (partly through necessity, partly for reasons rooted in the history of the Egyptian republic and the structure of its economic system) is buying temporary stability at, potentially, a high future price.
That’s an ugly situation for the next US president to face—a government that you can’t live without but that you may not be able to live with. And the collapse of American prestige and credibility among virtually all sections of the public (because the dazed and confused performance of the US during and after the so-called “Egyptian revolution” serially enraged and betrayed every political faction in Egypt) won’t make things any easier.