Post-Revolution, Egypt Seeks Financial Support
Since its revolution, Egypt's economy has taken a blow. It has already lost more than half of the foreign currency it once had from investors and tourists. Now the new Egyptian government is fighting to secure a $4.8 billion IMF loan. Host Linda Wertheimer talks to Farah Halime, a business reporter whose blog Rebel Economy focuses on financial rebuilding after Arab Spring.
LINDA WERTHEIMER, HOST:
This is WEEKEND EDITION from NPR News. I'm Linda Wertheimer. Since its revolution, Egypt has faced enormous political hurdles. But another problem that was lurking in the background is now front and center - money. The country is facing a rapidly shrinking currency reserve. And now the newly elected president, Mohamed Morsi, is fighting to prove that Egypt can qualify for a $4.8 billion loan from the International Monetary Fund. Joining me on the line now from Cairo is Farah Halime. She is a business reporter. She runs a blog called Rebel Economy. Farah Halime, welcome.
FARAH HALIME: Thank you.
WERTHEIMER: Now the Egyptian pound declined sharply this week. Can you tell us why? Can you tell us what's happening?
HALIME: Well, the pound has fallen about 3 percent in one week alone because of a crisis of confidence. The political situation has deteriorated to such an extent that investors and Egyptians have lost faith in the government's ability to stabilize the economy. And because of a series of decisions they have decided to swap their pound for dollars because of a fear that the pound will devalue further. And that's why we're seeing the pound falling to 6.4 to a dollar, whereas it was about 6 pounds to a dollar for many months and years before this happened.
WERTHEIMER: Well, so what happens to the economy when the currency takes a hit like that?
HALIME: The most significant impact will be on what Egypt is buying. So the first impact really will be Egypt's imports of wheat. It's the biggest net importer of wheat in the world. It's also a major importer of sugar and tea. So the prices of these commodities will be more heavily felt for Egypt. And that will obviously translate to Egypt's people and its families. So you're going to see many of Egypt's society really suffering as a result.
WERTHEIMER: Well, now Egypt has historically been a country which has heavily subsidized certain sort of staples that individuals and business need, things like cooking oil, bread, gasoline. The price is held artificially low by subsidies. Can Egypt continue to do that with the currency going down?
HALIME: Egypt has now, you know, got to a point where this addiction to subsidies is well and truly over. They can't do it for much longer and it's time to make those reforms. There are plans to put these into force this year but we're still waiting to hear what happens.
WERTHEIMER: Now an IMF mission, I understand, is headed to Egypt to talk again about that $4.8 billion loan agreement, which has already been postponed once. Where are they now on the agreement and how important is it that Egypt get it?
HALIME: This is a crucial agreement for Egypt because it acts as a catalyst. It's really more than just $4.8 billion. It's about approximately $14 billion of additional financial support that would be unlocked because of this deal going through. And investors are waiting for this agreement to be signed so that they can go back into Egypt with confidence.
WERTHEIMER: What does President Morsi need to do to get a grip on this situation, to help to ease his economic problems and restore the interest in investing in Egypt that has existed until now?
HALIME: You know, he's made a few different decisions in the last month that has really been the cause behind this crisis in Egypt. He decided to delay a very critical learn for Egypt. He also pushed through a very contentious constitution. He also announced reforms that were then retracted. So that caused a lot of confusion. And the central bank and the government can no longer spend more money. They've run out of money and that's why we're seeing, you know, people panicking and changing their money. And that has significant impact.
WERTHEIMER: Farah Halime is a business reporter working in Cairo. She runs the blog Rebel Economy. Thank you very much for joining us.
HALIME: Thank you. Transcript provided by NPR, Copyright NPR.