CAIRO: As a sit-in demanding the Supreme Council of the Armed Forces hand over power to civilians enters its ninth day, experts predict that as the country’s government fails to put in place the needed economic reforms, political and social unrest will keep intensifying.
“Policies should be focused on jobs and private businesses in order to get angry protesters out of Tahrir Square and working; otherwise we continue to hurt ourselves and we will see more riots simply because people are hungry,” said Magda Kandil, executive director of the Egyptian Center for Economic Studies.
“We have almost entered a vicious circle. It could escalate to another round of revolution because people no longer have the patience they had 10 months ago with the military,” she said. “As time runs out, the patience is running out and people will start to express their frustration, which could create another wave of intense riots. We need to move quickly,” she said, referring to government.
Since the end of the January 25 uprising, which called for justice, democracy, and better economic opportunities for Egyptians, the government has been moving very slowly when it comes to economic reform and job creation.
“I don’t rule out the revolution of the hungry. January 25 was somewhat like this. The youth started it, but the support was coming from the population who had been feeling the pinch. And now they have waited 10 months on the government, the government has responded, but they have not responded in the right way to provide the kind of economic reform that we need,” said Kandil.
Government spending has also not been targeted in the right place. According to Kandil, instead of providing temporary social subsidies, the government should have provided a functioning economy, or in other words, an economic environment where people can operate.
“Social subsidies are not enough, there needs to be resources to help the private sector, there needs to be more jobs for these people who need income to put food on the table, who need security and stability in a growing economy,” she said.
Currently, 70 to 80 percent of subsidies go to those who do not need them, Kandil said.
She pointed out that those subsidies actually go towards energy sources, when they should to be focused on boosting businesses to create jobs, for example.
On Nov. 19, several hundred protesters took to the streets across the country once again. Central Security Forces responded violently, injuring thousands and killing over 40.
Days later, on Nov. 24, Standard & Poor’s ratings agency pushed Egypt’s sovereign credit rating deeper down the drain, citing the country’s grave political and social situation and increased risk of “civil strife.”
“The downgrade reflects our opinion that Egypt’s weak political and economic profile … has deteriorated further,” the agency said in a statement.
S&P cut Egypt’s long-term foreign and local currency rating further to B+ from BB- with a negative outlook.
“When we are downgraded again by S&P, this shakes confidence, causes the pound to depreciate, and this causes difficulty in finding loans,” said Sondos Faramawy, a consultant at Boston Consulting Group (BCG).
According to the Central Bank of Egypt, Egypt’s reserves were at $22.1 billion at the end of October. As social unrest mounts, Egypt’s stocks also plummet day by day.
Foreign reserves have fell by almost 40 percent this year. While the year to date change on Egypt’s main index in the stock market has seen a 47.07 percent decrease.
“It is not likely they would have stabilized or increased. At the end of November we could very well be down to $ 20 billion or so, our import bill is quiet high and we are moving in a direction where we will need to secure more reserves in the future,” Kandil said.
Faramawy maintained, however, that while the country is running out of reserves and resources, it has not reached the “darkest times.”
“The demands are hitting the roof in terms of salaries and pay, we are running out of reserves and resources, and the ministry of social solidarity has an obligation to make sure resources are available whether its wheat, gas, food,” she said. “In a sense we are in trouble, but it is not the darkest time, you are really in trouble when inflation hits the roof.”
According to Faramawy, the Egyptian pound continues to depreciate. From her observations over the past months since the uprising, there has been no real economic strategy implemented by the government.
“We are faced with a situation where the government is not really moving towards economic reform, and there is no real strategy for bringing in investment,” she said.
“We are in a completely volatile situation and it could very well get worse, everyone is expecting it to get worse tomorrow, literally because we have elections. The hardcore economist might very well tell you we will find out how bad things will be by the end of next week.”
According to Faramawy, many Egyptians who have been feeling the hit of the economy and the burden of not being able to provide for their families curse the protests.
“Many from the poor classes just want to get back to work and want to go to their jobs without fearing that they might be fired due to budget cuts because of the constant unrest,” she said.
The country’s tourism has also gone down the drain. As you enter Egypt’s airport, it is clearly visible that foreign visitors have significantly gone decreased.
Meanwhile, since the Supreme Council of Armed Forces (SCAF) assumed power in February when Mubarak stepped down, they have constantly blamed the country’s unrest on “foreign hands” and “outside forces” that want to see Egypt suffering in a desperate situation.
During the 18 days of the January 25, Mubarak and his staff had also blamed the protests calling for their ouster on “foreign hands” with hidden agendas and want to see Egypt fail.
“This is an agenda that is trying to hide a bigger problem; these people went out in Tahrir because of suspicion of the military who they see has not been fulfilling their demands,” Kandil said.
Comparing the previous situation with today’s protests in Tahrir and across parts of the country, Kandil pointed out that one must look at the bigger picture.
“Foreign agendas are not the major issue here, the government is using this theory to distract attention from its shortcomings,” she said.
“We are shooting ourselves in the foot, we need to put our house in order, we need tourism and foreign investment and to act like we don’t need these things is crazy, the foreign agenda theory is completely wrong because the dominant factors here are domestic, not external.”
Kandil stressed that Egypt needs to stop “playing these conspiracy theories about foreign intervention.”
“We need to get our problems resolved first; there is a lot of division on the domestic front.”
