Since the military coup that ousted Mohamed Morsi, a spark in Egypt’s economic recovery has been noticed by economists. Within the past week economists have been optimistic about Egypt’s economy, stating the stock market soared by 7 percent since the coup.
Many analysts have put forth the idea that Egypt can now apply for long-stalled loan financing from the IMF, to shore up finances and initiate structural reforms. The International Monetary Fund will release funds once an internationally recognized government is set up in Egypt. Regional countries such as Qatar have kept the economy afloat previously by loaning cash to the central bank.
Upon the news of the ouster of Morsi’s regime all hopes of recovering funds from the IMF initially were dashed. With the country of Qatar originally an ally of the Muslim Brotherhood, funds to Cairo could stop completely. It is suspected that countries such as Saudi Arabia could be a source of support for the rebounding Egyptian economy.
It is suspected that once IMF requirements are met the country could receive approximately $9.7 billion from other international donors. Roughly 1.55 billion in bilateral aid from Washington could be received by Egypt, when their military acknowledges an established government.
No one suspected that the ouster of Mohamed Morsi could spark economic recovery in Egypt. Economist Caroline Freund stated the country hasn’t been producing enough jobs for the fast-growing population. She noted the youth unemployment rate soared around 25 percent. “There was the political uncertainty, the economic uncertainty, there was no policy predictability,” Freund said. “Investors lost confidence and decided to wait. Because of the security concerns, tourists stopped coming – that’s around 10 percent of Egypt’s GDP.”
Many liberal activists and politicians supported the ouster of Morsi’s regime. It is unclear of the repercussions of those that both support democratic values and the ouster of the first democratic president. The Brotherhood came to power because of a better organized movement, out mobilizing other political groups after Mubarak’s fall.
Economists have speculated that if the Egyptian economy is to rebound it must be done with timing. “What we found is that in revolutions and other political transitions, speed seems to be an important factor for success,” said Freund. General Abdel Fatah al-Sissi, had little information on strategies for strengthening the economy. In addition, no viable leaders have been named to institute any long term form of government in the country. It is not readily known if there will be a return to a democratic model of leadership in the long run.
One strategy discussed among economists for building the country’s economy was the scaling back of Egypt’s fuel subsidies. This expenditure alone consumes 8 percent of the country’s GDP and could be viewed as highly controversial. Any major changes certainly should be made expeditiously and while transitioning the government into new policy principles. Sparks in economic recovery in Egypt should be accomplished with earnest after the ouster of Mohamed Morsi. With a stable government in place the economy will likely recover sustaining the civilian populous. Morsi supporters continue to rally against the army in an attempt to raise discord in the political process.
By Thomas Barr