The economic travails of Egypt have barely been addressed in the run up to the historic presidential election. Stephen Glain discovers that hopes are pinned on a spectacular turnaround once a new president is in place.
Conspicuously absent from Egypt’s presidential elections—the first round of which ends today (Wednesday)—has been a serious discussion about the flagging economy. Last week, when Standard & Poor’s declared that a depreciation of the Egyptian Pound was inevitable and that it was reducing its credit rating on the banking sector, there was nary a mention of it in the local press.
Among the many businessmen, party leaders and economists I’ve spoken with there seems to be a faith-based notion that the election of a new president—albeit one whose powers remain undefined by a constitution that has yet to be written—will almost by itself revive foreign direct investment, worker remittances, Suez Canal traffic, and tourism arrivals. This for an economy that suffers from an acute liquidity crisis and is expected to grow by less than one percent this year, if at all.
Khairat El-Shater, deputy supreme guide of the Muslim Brotherhood and himself a highly successful businessman, laid out for me a compelling plan to modernize Egyptian tourism, rebuild its failing infrastructure and establish a world-class industrial base. When I asked where the financing would come from given Cairo’s depleted foreign exchange reserves and absence of investment from abroad, he said it would come surging back after the election.
On Tuesday, Tarek Shaalan, who heads the economics committee for Egypt’s largest Salafi party, told me the economy would be saved by the post-election enabling of Islamic banking and investment funds that would flush to the surface the country’s vast underground economy, where it could be audited and taxed. All this would happen by the end of the year, he said, once the new president is sworn in.
It’s not just the Islamists who are stirred by the presumption of a post-election idyll. With few exceptions, Cairo’s investment banks are seizing on isolated signs of recovery—mainly an extraordinary rise in worker remittences from Libya, a modest increase in foreign reserves of $100 million and a slight rise in local-currency deposits—as the basis of sanguine growth estimates.
None of this is to disparage Egypt’s historic elections nor enthusiasm among the people who boldly struggled for them. And it is entirely possible that political stability, or at least a facsimile of it, will revive investment and the tourist trade. Structural problems that impair the economy run wide and deep, however, and expectations of their speedy resolution could ultimately render Egyptians cynical and dismissive about the very democratic system that can redeem them after thirty years of oppression and neglect. While they are rightly proud of having deposed a dictator, the popular notion that “the hard part is over” makes for a dangerous conceit.