IMF’s intervention in Egypt: « All hopes of the revolution vanished »

Flying birds in the sky of Al Azhar Park, Cairo — Credit : Sarah Calamand ©

In order to straighten out its economy, Egypt is putting its population on the test of austerity. Yet, due to a persistent unstable political and economic context, hopes are disappearing.

« Everything is devastated. Prices have doubled, for all products. Whether it is at the grocery store, services, electricity, clothes, gas, everything ! Gas prices rose by 45%! While the wages remain the same. » With these few sentences, Ibrahim[1] and his wife Marwa, respectively teachers in High School and Kinder garden, outline the current living conditions of the Egyptian people. Inflation, no subsidies on fuel, imported good that cannot be found anymore… This is the price to pay, in the hope of seeing Egypt’s economic situation improve. The Egyptian government finally implemented the IMF’s imposed requirements in order to receive a 12 billion dollars loan. A 3 years austerity plan supposed, according to the IMF President, Christine Lagarde, to restore competitiveness through economic growth and the reversal of the curves of the budget deficit and the public debt[2]. But who cares about macroeconomic indicators when everyday life has become a battle? Mohammed, a 28-year-old-architect reported that « According to the plan, this is just a bad time for the country to pass. But the current situation is not fair, so many people are suffering. The situation is really worsening ». Because of the inflation phenomena, a bigger part of the population is affected by precariousness. Omar Ghannam, Economist at the ECESR[3], expects to see about 40% of the population below the poverty line in the next two years, from 28% today. “The population is not expected to make any gains especially in the absence of any effective form of social support ».

The IMF to the rescue of Egyptian misfortune

Since the 2011 revolution, Egypt has been facing an economic crisis that became preoccupying those past few months. Currency reserves (dollars and euros) are tumbling down. Tourism, which is the country’s main source of income, almost disappeared. Black market is dramatically expending, according to local authorities. Thus, Monday October 31st 2016, the Egyptian Pound (EGP) has been devaluated over more than 50%, reaching the record rate of 18,2 EGP for one US dollar. The floating, which was implemented the following Thursday, emphasized the government’s docility regarding the IMF’s specific requirements. This emergency plan is aimed to revitalize investments, especially foreign ones, and thus to ensure to Egypt the come back of growth. The creditors vaguely announced some social measures, such as the return of food subsidies or new job opportunities. But faced to this promise of a golden future, the Egyptian population is focused on one thing : the precariousness and the misery that are gaining ground.

History killed hopes

Economic indicators are clear : currency devaluation leads to inflation, but also brings foreign investments back. Mechanically, GDP is expected to increase. « This financial assistance will directly go to the central bank to rise the currency value, budget deficit will benefit from it » Professor Mona Ameer explains, who teaches at the Faculty of Economics and Political Sciences, in Cairo. In the same way, the use of Black Market shrunk, as explained by CEDEJ[4] Researcher Clément Steuer : « Foreign currencies are now officially available again to be purchased. Besides, some mesures were implemented against illegal exchangers. Regarding black market, the measure is effective. » Yet, people are still skeptical. Omar Ghannam declared : « As long as the funding of imported goods remains an issue, unsolvable in the near future, the effectiveness is threatened and the positive impacts of the measure will not last. » He predicts a strong comeback of the black market.

This pessimistic view is based on History : after the country received a « rescue pack » from the IMF in 1991, the indicators initially improved but the Egyptian economy soon became worse, leaving the people to dramatic circumstances.

Austerity consequences naturally lead to people’s discontent, exacerbated here by the lack of transparency from the government concerning its plans. « We don’t feel like the government has a real economic strategy » Mona Ameer said. « Up to now, the policies conducted are meant to deal with emergency situations, not to anticipate what will happen in the future » declared Karim, a 27-year-old Marketing consultant who rejects the government’s provisions. According to him, « this money is a loan, there were better solutions than debts. There’s no reason why poor people should suffer even more ». On January 25th has been held the 6th anniversary of the 2011 movement. But after being disappointed by two unsuccessful revolutions, people’s bitterness just increased. Egyptians now see popular demonstrations as useless. « We should now start to think about new techniques : teaching about human rights, about democracy » Karim thinks. The gap between the Egyptian people and the government is way bigger than what indicators show. If the crisis that is facing Egypt today is seen as an economic crisis, it is nonetheless a political and social crisis too. And with inflation shown as the only way out, the hopes for change are undermined.

« Future? I’d rather not think about it… » [5]

Despite dark outlook, the local elections to come should lead to a renewal of the elites : « Relationships between the State and the citizens, between the administration and the people should be modified. Political parties have a role to play in this equation », Clément Steuer explains. However, for some people, hope is qualified : « New generations have the power to change things, but it depends on their ability to think differently, or to simply climb on the bandwagon… »

Thus, today many young Egyptians only dream about leaving, far from repression and a tasteless future. What Egypt mostly suffers from today, is the lack of people’s faith in the country, more than just an unstable economy. What can be the future of a regime without popular support and which already chose to please international creditors over its population in the past?

[1] All civilian names have been changed.

[2] Source : IMF

[3] Egyptian Center for Economic and Social Rights, independent association

[4] Centre d’Etudes et de Documentation Economiques et Juridiques — French center of research based in Cairo.

[5] Quote from Mohammed’s interview.

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