Saad Saleem
Egypt has been facing an economic crisis for several years now. The country’s economy has been struggling with a number of issues, including high unemployment, inflation, a weak currency, and a large budget deficit. These challenges have been exacerbated by the COVID-19 pandemic, which has hit the tourism sector, a significant contributor to Egypt’s economy, particularly hard. In this article, we will explore Egypt’s economic crisis and the measures taken to address it.
The Egyptian media and senior government officials hold the Russia-Ukraine war responsible for the major economic crisis that Egypt has faced since February last year, and even before.
According to them, the war cancelled out the “massive gains” made by the economy during the implementation of the reform programme between 2016 and 2021.
The cost to the economy in Egypt caused by the war, they claim, is estimated to be billions of dollars. Three months after the outbreak of the war, Prime Minister Mostafa Madbouly revealed his government’s estimates on 15 May 2022 for the cost of the direct financial impact of the war on Egypt.
It was said to be costing the country 130 billion Egyptian pounds ($7.1 bn), with an additional 335bn pounds ($18.3bn) indirectly. According to senior officials and various media outlets, the war caused $22bn of hot money to be moved out of Egypt, and deterred foreign investment.
One of the main challenges facing Egypt’s economy is unemployment. The country has a high youth unemployment rate, with approximately 25% of young people out of work. This has been attributed to a lack of investment in job-creating industries, as well as a mismatch between the skills of job-seekers and the needs of employers. In addition, Egypt’s informal economy is large, which means that many people are working in low-paid, insecure jobs without social protections.
Another issue facing Egypt’s economy is inflation. The country has experienced high inflation rates in recent years, with prices increasing by around 6-7% annually. This has been driven by a number of factors, including a devaluation of the Egyptian pound, rising food prices, and increases in the prices of fuel and electricity. Inflation has hit low-income households particularly hard, as they are more likely to spend a larger proportion of their income on basic goods and services.
A weak currency is also a challenge for Egypt’s economy. The Egyptian pound has lost value against the US dollar in recent years, making imports more expensive and contributing to inflation. The devaluation of the currency has also made it more difficult for businesses to access foreign currency, which is needed to import raw materials and machinery.
In addition to these challenges, Egypt’s economy has a large budget deficit. The country has been running a deficit for many years, which has led to high levels of public debt. This has limited the government’s ability to invest in infrastructure and social services, which are needed to drive economic growth and reduce poverty.
The COVID-19 pandemic has further exacerbated these economic challenges. The pandemic has hit the tourism sector, a significant contributor to Egypt’s economy, particularly hard. With international travel restrictions and reduced demand, the sector has suffered significant losses. In addition, the pandemic has led to reduced economic activity, further exacerbating unemployment and inflation.
To address these challenges, the Egyptian government has implemented a number of measures. These include a series of economic reforms aimed at reducing the budget deficit, increasing foreign investment, and improving the business environment. The government has also introduced social protection measures to support vulnerable households, including cash transfers and subsidies for food and fuel.
However, these measures have not been without controversy. The economic reforms, which include reducing fuel subsidies and implementing a value-added tax, have led to protests and social unrest. Critics argue that the reforms have disproportionately impacted low-income households and have not done enough to address structural inequalities in the economy.
In conclusion, Egypt’s economic crisis is a complex and multifaceted issue that requires sustained attention and investment. While the government has taken steps to address the challenges facing the economy, more needs to be done to reduce unemployment, inflation, and the budget deficit. In addition, efforts should be made to address structural inequalities and create a more inclusive economy that benefits all Egyptians.
The HeadQuarters Daily