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Reinvigorating Egypt’s Economy

NEWPORT BEACH – Some two years into Egypt’s grass-roots revolution, the country’s economy is in a worrisome downward spiral. A growing number of people, inside and outside of the country, are starting to blame the revolution itself for derailing an economy that was growing, reducing its external-debt burden, and maintaining a comfortable cushion of international reserves.

Blaming the revolution is the wrong approach to Egypt’s current economic woes. Yet its appeal to some is understandable, given that the country’s economic situation has continued to worsen over the last few months. Growth is anemic, unemployment is high, and new investment has fallen off dramatically – all of which complicate already-difficult financial, social, and political conditions. The result is a growing threat of several vicious circles at once.

Domestic supply disruptions are now fueling inflation and compounding the problems of a subsidy-laden national budget. They have also aggravated the weakness of external finances, contributing to a sharp drop in international reserves that has been contained only by exceptional loans and deposits from abroad.

Inadequate growth and higher inflation impose a particularly severe burden on Egypt’s most vulnerable. Public safety nets are overstretched, with too many poor people falling through. Moreover, other support networks – including income opportunities in tourism, the informal sector, and charitable and family support – are crumbling under the pressure of growing poverty.