Egyptian Economy Is Collapsing After IMF Deal. Should Pakistan Be Worried?
The devaluation of rupee goes unchecked, as the government has left the dollar pricing up to the market, making everything expensive, including the POL products. The people are paying more for utilities after the withdrawal of subsidies and even for the food items thanks to the budget measures amid the efforts aimed at revenue generation.
These are some of the results after the PTI government inked a deal with the IMF [International Economic Fund] with the conditions obviously set by the Fund.
It reminds us of Egypt, as a recent World Bank report, says that “some 60% of Egypt’s population is either poor or vulnerable”.
And the living standards of ordinary Egyptians are plummeting as elites line their pockets, as overall living conditions, meanwhile, are sliding rapidly.
This comes after Abdel Fattah al-Sisi has sold his country as an investment destination with the IMF’s help.
And that’s why a piece published by the Foreign Policy questions the rosy picture painted about Egypt by financial commentators, describing it as “the world’s hottest emerging market”. One investment bank called Egypt’s apparent recovery the “most attractive reform story” in the Middle East, Africa, and Eastern Europe.
But the Foreign Policy said, “A grand deception lies at the heart of Egypt’s miraculous economic recovery, and its architects are the government of General-turned-President Abdel Fattah al-Sisi and the International Monetary Fund.”
“If the current trend continues, Egypt will soon be bankrupt,” it warned.
“The government’s chronic mismanagement of public finances and overall negligence has caused external debt to rise nearly five fold, due to depreciation of the Egyptian pound, in the past five years and public debt to more than double—and this is expected to continue for the foreseeable future,” it added.
“The government currently allocates 38 per cent of its entire budget merely to pay off the interest on its outstanding debt. Add loans and installments, and more than 58 per cent is eaten up,” it notes.
The Foreign Policy warned, “In a country of 100 million people on the shores of the Mediterranean, such meager spending on health, education, and infrastructure is alarming, and it should alarm those in Europe, too.”
According to the Foreign Policy, it is the first step on a narrowing road toward total state failure, as Sisi’s government is already losing legitimacy in the international arena thanks to widespread reports of election-tampering.
If that government fails to provide basic services to the people it purports to serve—all the while continuing its regime of repression and cruelty—it will have shown its utter inability to govern in even the most basic way as well.
Meanwhile, there is another worrying aspect too. “The impact of the mass migration that began when Libya became a failed state was clear to all who cared to pay attention. Egypt is a country more than 15 times the size; the repercussions of its failing would be so dramatic as to be almost unimaginable.”
On the other hand, there is another similarity between Pakistan and Egypt. “The IMF has manipulated the structure of the Egyptian economy; it posts growth rates for Egypt, but these are exaggerated by levels of debt in the same way that one might exaggerate their income by borrowing beyond their means.”
“An example of this exaggeration can be seen in Egypt’s foreign currency reserves of more than $40 billion. While sizable, these reserves are made up of borrowed money and constitute an external debt, all the while artificially bloating the size and stability of the Egyptian economy.”