Cairo - Egypt has seen some surprisingly positive macroeconomic news over the past few days, an incongruous development in a country that just deposed a president in part because of his poor stewardship of the economy.
Egypt's neighbours in the Gulf wasted no time in showing their support for the new interim government after president Mohamed Morsi was deposed. Saudi Arabia, Kuwait and the United Arab Emirates announced a package of loans and grants worth $12bn, enough money to keep Egypt's troubled central bank ticking over through the transitional period.
And the benchmark EGX30 stock index, which had been trading at a one-year low, has surged over the past two weeks: It was trading at 5,325 at the close of business on Wednesday, nearly 17 percent higher than on June 25, before the military coup that drove Morsi from power.
The economy is not doing well, whatever way you are looking at it ... People tend to focus on one [problem] and forget about the rest.
But these macroeconomic blips are about the only positive economic indicators in Egypt right now. GDP growth has slowed to about 2 percent, which on a per-capita basis is basically zero.
According to official statistics, the unemployment rate has hit 13 percent, up from 9 percent before the revolution; that figure almost certainly underestimates the extent of the problem, particularly among younger Egyptians.
The value of the Egyptian pound, meanwhile, has plummeted. It is trading at more than seven to the dollar, compared to about six when Morsi took office. Worsening fuel and electricity problems have paralysed transport and industry, and there are fears of a looming bread crisis.
The revolutionaries who ousted long-time President Hosni Mubarak demanded bread and social justice, but after two-and-a-half years of military and Muslim Brotherhood rule, the government has made little progress towards those goals. Hazem el-Beblawi, the liberal economist who was announced on Tuesday as Egypt's interim prime minister, has taken ownership of what many economists describe as the worst economic climate since the Great Depression.
"The economy is not doing well, whatever way you are looking at it," said Ahmed Galal, the director of the Economic Research Forum. "It has imbalances, a budget deficit that is growing at a time when domestic public debt is really high, sluggish economic growth ... People tend to focus on one [problem] and forget about the rest."
'He made it worse'
Signs of stagnation are everywhere. The already clogged streets of Cairo are lined with an endless sea of vendors, members of an informal sector that now accounts for some 60 percent of economic activity, according to a 2012 study by the Federation of Egyptian Industries.
Tourism accounts for another 11 percent, but it remains well below pre-revolution levels: Egypt expects to receive perhaps 13 million tourists this year, down from nearly 15 million before the revolt, and official forecasts predict that tourism revenues will decline by 28 percent, as mentioned by then-Tourism Minister Hisham Zaazou in a speech in June.
In the capital's iconic Tahrir Square, a national museum that once welcomed thousands of tourists each day now counts its visitors in the dozens."The government has done nothing to help," said Ibrahim Shoqqi, a guide in the museum.
The guides and gift shop owners who once thronged tourists on the streets now linger inside darkened storefronts with half-shuttered windows. "My company used to employ 25 people. Now we are just four," said Magdi Afifi, an agent in one small travel firms on the square. "We are exhausted after these past two years."
Industrial areas on the outskirts of Cairo feel almost abandoned. Some 4,500 factories have been shuttered since the revolution, according to a report issued in March by the Centre for Trade Union and Worker Services, with thousands more struggling to keep their doors open.
"We had to change our price list. Our raw materials come from Spain and Italy, and I was watching each day the value of the pound to the euro drop," said Hisham el-Sadiq, the executive director of Royal Ceramics.
Ahmed Abdel Sattar, the owner of a factory that makes construction materials, said his business has declined by 40 percent over the past year. He blamed that partly on the political chaos within Morsi's administration.
Several of his ministers were criticised for their lack of experience. His final investment minister, Yehia Hamed, was a Muslim Brotherhood cadre whose economic experience was limited to his work as a Vodafone marketing manager.
"There have been three ministers of finance in the last year, and every one of them has had a different plan," Abdel Sattar said. "Morsi didn't have a plan for the economy. He made it worse."
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Abdel Sattar also complained about higher taxes on steel and cement that were introduced in February, saying they have hurt business.
The tax issue helps to highlight the economic dilemma that faced Morsi's administration. Egypt desperately needs to increase tax revenues in order to close a widening budget deficit, now estimated at about 200bn Egyptian pounds ($28.5bn). That amounts to 11.5 percent of gross domestic product, a sharp increase from before the revolution, when the deficit was about 8.5 percent.
Without introducing reforms, Egypt has little chance of securing a $4.8bn IMF loan that it hopes will spur foreign investment. But tax hikes are broadly unpopular. The government first tried to introduce new taxes in December, but Morsi shelved the proposal hours later, via a 2am statement on his Facebook page, after a public backlash.
'It's not sustainable'
Morsi's government tended to insist the economic crisis was exaggerated. They said lengthy fuel queues are caused by corruption and panic-buying, not actual shortages, and that talk of a bread crisis is overblown.
But economists say the problems are real, and largely caused by the drop in reserves. The central bank sometimes holds several auctions each month, selling off foreign currency to prop up the ailing pound. The bank's holdings have plummeted from $35bn before the revolution to less than $15bn today.
Even that grim figure is misleadingly optimistic, because it includes illiquid assets such as gold, and because it does not account for massive debts owed by the state-run petroleum authority. The bank's net position, in other words, could be negative, owing more to oil companies and creditors than it has in reserves.
Fuel shortages have been one immediate consequence of the declining reserves. The petroleum authority cut back on oil imports earlier this year. "The government was not able to mobilise the funds to buy these products," said Samir Radwan, a former finance minister reportedly on the short list of candidates for the interim premiership. "And the petroleum authority already owes $6bn to oil companies."
Iraq and Libya tried to plug the gaps earlier this year, offering deals in which they would provide millions of barrels of oil per month on generous credit terms. But the Wall Street Journalreported last month the deals had stalled because the Egyptian government was unable to obtain letters of credit from international banks to back the loans.
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Other countries have stepped in to provide direct loans, including $2bn from Turkey and $1bn from Saudi Arabia. The largest creditor by far is Qatar, which has loaned $7bn to Egypt since last year, including a $3bn bond purchase completed last month.
All of that money has already been spent, though, and the central bank's reserves have resumed their slide. They decreased by more than $1bn in June, according to data released earlier this week. The latest cash infusion from the Gulf will provide a lifeline through the summer, but will do little to resolve the structural problems that went largely unaddressed during Morsi's year in office.
"[Morsi's administration] was only thinking of politics, not the economy," said Ahmed Ghoneim, an economist. "They thought since the Qataris keep coming up with money they can survive. But it's not sustainable by any means."