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Egyptian drivers wait in long lines outside a gas station in Cairo on June 26. Along with a stuttering economy, traffic-clogging street protests and a crime wave, fuel shortages have come to symbolize the disorder of the post-Mubarak Egypt. (AP)

If Egypt's Political Crisis Looks Bad, Check Out The Economy

by Krishnadev Calamur
Jul 11, 2013

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Krishnadev Calamur

The spotlight on Egypt has focused on the the political fallout from the military coup that toppled an elected but deeply unpopular government. But if you think Egypt's politics are a mess, just consider the economy.

Tourism, a major revenue generator, has been hurting since the Arab uprisings of 2011 that toppled Hosni Mubarak. Foreign investment has shriveled. Unemployment in many industries has soared. Inflation has risen, making everyday goods more expensive. And there's a black market in currency and fuel.

"Over the last few months, there have been shortages of diesel fuel for trucks, long lines at gas stations," says Samer Shehata, an assistant professor of Arab politics at Georgetown University. "More recently, there have been gasoline shortages, and long lines for personal cars. There have also been electricity outages — sometimes during the day."

These are just short-term problems, says Caroline Freund, senior fellow at the Peterson Institute for International Economics. But they are problems that must be tackled by Egypt's interim government.

"What you have in the short run is a real need of a semblance of stability and security so tourism and investment can come back. Because the economy can't come back without that," she says.

But there are deeper problems the country faces in the long run: high unemployment, an overly regulated private sector, which benefited from crony capitalism under Mubarak; and expensive fuel and food subsidies, which must be reduced if Egypt is to get a much-needed loan from the International Monetary Fund.

"They need to create 600,000 new jobs each year just to absorb the new entrants to the labor market, and they don't have the economy to generate that many jobs," says Bruce Rutherford, an associate professor of political science at Colgate University. "This is the core challenge."

Part of the problem is a private sector that hasn't grown fast enough.

"One of Egypt's core structural challenges is to create a private sector that can compete in the global market," says Rutherford, author of Egypt after Mubarak: Liberalism, Islam, and Democracy in the Arab World. Right now they can't, he says, because Egyptian goods can't match the quality and price of goods from Asia that are so popular in the global marketplace.

"The long-term issues will take some time to address," Freund says. "Part of the problem is that in tackling them you may add to the short-term pain that is already present. But right now, the most urgent thing is political stability."

There are some signs that help is on the way. In response to Mohammed Morsi's ouster as president, the United Arab Emirates has pledged $3 billion to Egypt, Saudi Arabia pledged $5 billion and Kuwait $4 billion.

And some of the chronic problems under Morsi — long fuel lines, high crime — seem to have diminished almost overnight. The New York Times notes that some of the sudden improvements in Egypt suggest a conspiracy to undermine the deposed Muslim Brotherhood president.

NPR's Leila Fadel is also reporting on the post-Morsi changes:

"At a gas station in central Cairo, Mohsen Fahmy waits to fill up his tank. But today there is no hours-long line.

"Everything is available now, he says.

"Almost overnight, the power cuts and diesel shortages that have plagued Egypt are mysteriously gone.

"Analysts say it's a sign of just how uncooperative the entrenched anti-brotherhood bureaucracy was when [Islamist President Mohammed] Morsi was in power.

"And now that it has been knocked out of power, liberal Egyptian businessmen say they're ready to put money back in Egypt, says business tycoon Naguib Sawiris: 'People like us who have held back now for two years will come back now and we will start with ourselves, we won't wait for others to come. Because if the Egyptians don't invest in their own country, who's going to believe in their country?' "

But as Michael Wahid Hanna of the Century Foundation tells Leila: "There's clearly at the moment a kind of irrational exuberance."

All of these issues that plagued the Morsi government, he says, will also confront whoever comes next.

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