Darker days ahead?

April 7th, 2013

Is an economic catastrophe looming? – Published on Al-Ahram weekly online, by Niveen Wahish, April 3, 2013.

Emergency rechargeable lamps are selling like hot cakes as the public prepares for yet more power cuts. As hard currency reserves plummet, the government is finding it increasingly difficult to keep power stations supplied with the fuel they need.

Since January 2011 Egypt has seen its foreign reserves fall by $20 billion. Currently they cover less than three months’ supply of essential imports. 

These days you can find yourself sitting in the dentist’s chair, drill poised above a decaying tooth when, without notice, the power is cut. School student Nour Hussein, 16, says she recently attended a chemistry lesson illuminated only by the flashlights of the pupils’ cell phones. Even Cairo airport has announced plans to close for five hours each night to save electricity.

As summer approaches Egyptians are braced for more outages. The last two blistering hot summers saw seasonal electricity demand soar as more and more air conditioning units were installed. Electricity supply remained the same, with the inevitable result of power cuts. That was when power stations were operating normally. This summer the problem will be exacerbated by fuel shortages.

It all boils down to cash. The slowdown in tourism and in foreign investment on the back of political instability has eroded inflows of hard currency. Although tourism revenues have grown by 13 per cent on the $8.8 billion earned in 2011 they still remain 21 per cent below 2010 figures. Net foreign investments for 2011/12 are estimated at $2 billion compared to $6.7 billion in 2009/10. Without $18.4 billion in remittances from abroad for fiscal year 2012/13, and Suez Canal receipts of $5 billion, the situation would be even worse.

The government is optimistic that current sources of hard currency will be enough to pay for oil and wheat imports. Even if they are right the real problem, says Monette Doss, senior economist and banking analyst at HC Brokerage, is that they will not cover the import of the intermediate and investment goods needed to spur export growth. She fears a total halt in economic activity if the situation is not reversed within a year.

“The status quo cannot be sustained beyond June 2014,” she warns. The government may be trying its best to reserve what hard currency it has for oil and food imports but queues at gas stations continue. Drivers of microbuses, trucks and tractors wait for hours hoping to fill their tanks. The forecourts of gas stations are becoming increasingly fractious, sometimes violent, places.

The real test of fuel availability will come with the imminent harvest season. Ensuring tractors have enough fuel to bring in the harvest is essential not only to farmers but a government which is relying on a bumper nine million tonne wheat crop, almost half its annual needs. An equal amount will still have to be imported: Minister of Supply Bassem Ouda has been quoted as saying that Cairo expects international suppliers to facilitate easier payment terms in order to keep their market share. Egypt is the world’s biggest importer of wheat. Existing supplies, according to Ouda, are enough to last till June … //

… The government is also seeking alternative sources of financing, including from Iraq and Libya. Negotiations are ongoing and few details have emerged. Yet even if the talks are successful in the absence of a coherent reform plan capable of instilling confidence in the economy such funds represent little beyond a temporary breathing space.

Rumours of an imminent cabinet reshuffle are doing little to increase optimism. It will make no difference, says Salah, manager of the Downtown electrical shop. He expects any new ministers to be selected for their loyalty to the president rather than on the basis of competence.

“My hopes grow dimmer by the day,” he says, “just like Cairo’s streets.”
(full text).

Links
:

Plus ça change … the crisis in Syria enters its third year with little end in sight,  on Al-Ahram weekly online, by Omayma Abdel-Latif, April 3, 2013;

Muslim Brotherhood plc, on Al-Ahram weekly online, by Mahmoud Al-Qeii, April 3, 2013.

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