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Sisi’s Status Shaken By Egypt’s Economic Woes

Criticism of President rampant on social media

Egyptian officials say they hope to gain approval for a $12 billion loan by the International Monetary Fund (IMF) in the next few weeks. Egyptian officials hope the loan will solve Egypt’s severe shortage of foreign currency that has crippled its economy and threatens to fuel spiraling inflation.

The black market rate of the Egyptian pound today is more than double the official rate of 8.8 pounds to the dollar. Egyptian officials speculate that as part of the IMF loan, Egypt will be forced to devalue its currency. IMF officials say they will not urge the government to cut food subsidies, which are a lifeline for the approximately 25 percent of Egyptians who live in poverty.

As a condition of the IMF loan, Egypt must come up with $6 billion in bilateral financing that will help sustain Egypt in the first year of the program. Officials say the country is progressing toward that goal and announced a $2.7 billion currency swap with China.

Egyptians say there are growing shortages in the country.

“Prices have risen to the point where it’s becoming difficult for people to make ends meet,” Hisham Kassem, an Egyptian journalist and analyst told The Media Line. “There are growing shortages as well. If you go to the wholesale chain stores, you will see products missing from the shelves with a note of apology.”

The shortages, including of sugar, which Egyptians use heavily in tea, come as Egyptian President Abdel Fattah el-Sisi is becoming an object of ridicule. Sisi was wildly popular when elected, with candy companies even manufacturing chocolate coins wrapped with Sisi’s portrait in foil.

Sisi this week was trending on social media with some bizarre comments saying that “for ten years his refrigerator had nothing but water.” The comments went viral, sparking thousands of Twitter comments. Sisi later seemed to backpedal, saying that he had come from a privileged home in Egypt.

“When he says that for 10 years he drank only water and didn’t complain, he is effectively telling us: Starve to death and shut up,” one Twitter user wrote. “The man who devoured all the investments that came from the Gulf tells us he never complained.”

Hisham Kassem says that comments like these would have been unheard of when Sisi was elected in 2014.

“He got more than 25 million votes and he was extremely popular,” he said. “People had high hopes, and he was almost sacred.”

At the same time, Kassem says that it is important for Egypt’s democracy that Sisi finish his term in 2018. Long-time autocratic leader Hosni Mubarak ruled Egypt for almost 30 years, until he was forced to step down amid mass anti-government protests in 2011.

In Egypt’s first democratic election in decades, Mohamed Morsi of the Muslim Brotherhood was elected President, and ruled for just over a year, until Abdel Fattah el-Sisi, then the head of the army, outlawed the Muslim Brotherhood, and sentenced Morsi to life in prison.

Thousands of members of the Muslim Brotherhood were arrested and convicted in hastily organized trials, and hundreds sentenced to death, although none of those sentences have been carried out.

Egyptian analysts say that Sisi must change his economic emphasis as well.

“The president had been advised to go for mega projects like the Suez Canal expansion without necessarily having the financial data in place to support the decisions,” economist Amr Hosnsy told The Media Line. “A narrow circle of tycoons have Abdel Fattah el-Sisi’s ear on economic policy.”

The New Suez Canal project, which cost $8.2 billion to build a new shipping lane along part of the canal, was completed last year. Done primarily by shipping firms with ties to the military, the widening of the waterway was supposed to double its annual earnings in less than a decade, pump life into Egypt’s lagging economy and create more than a million new jobs but last year, Suez Canal revenues declined more than 5 percent to total $5.1 billion, down from $5.5 billion in 2014.

Sahar Nasr, Minister of International Cooperation told a conference in Cairo cosponsored by the European Bank for Reconstruction and Development, the European Investment Bank, and the World Bank, that the notion that the government gave preference to state-owned enterprises and a cluster of politically connected firms was as much of a perception problem as a policy.

“In the past months we have implemented new contracting laws requiring open bids on government projects and we are posting these tenders online,” said Nasr. “Despite the progress accomplished by the government, efforts are still needed to facilitate more investors in the private sector.”

Unemployment in Egypt is officially at 13 percent, and among the youth it is more than double that. The country has a trade deficit of 7 percent of GDP, and a budget deficit of 12 percent of GDP. Neighboring Tunisia, which has struggled with similar issues has only a 4.4 budget deficit.

Part of Egypt’s economic problems stem from the collapse of the tourist industry since Islamic State shot down a Russian charter flight over the Sinai desert a year ago, as well as the mysterious crash of an EgyptAir flight in the Mediterranean in May.

Egypt has a fast-growing population of more than 90 million people, and has long played a major role in the Arab world. Egyptians say that they want Sisi to succeed, as does the international community.

“Egypt is going to head in the direction of democracy,” Hisham Kassem said. “But it takes years to create those institutions.”