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Egypt’s Struggling Economy |
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The Egyptian economy is in very real danger of halting to a stop as the value of its pound continues to slide forcing many businesses to simply cease trading as the black market grows. Importing and exporting appears to be near-impossible for many smaller businesses as the currency simply isn’t strong enough against other World currencies. The decline of the pound is as a direct result of tourism and foreign investment, Egypt’s strongest sources of income, falling sharply since the uprising in 2011 which saw the forced resignation of president Hosni Mubarak. The country struggled to recover from the civil unrest and confidence in Egypt from the International community slowly eroded. Egypt’s situation is now in a grim state, despite being a major oil producer, the country cannot af-ford to expand its production. Foreign reserves have dropped to around $19 billion, a stark contrast from the $36 billion which it saw coming in circa 2011 when aid was readily available to Egypt. And of course, the pound is being hit hard. Declining Pound Reuters stated recently that there were some black market traders who were buying up dollars for as little as 17.5-17.8 pounds and selling them on for around 18-18.2 to importers “representing a two-pound slide in a single week and five-pound slide on the month”. It has also been reported that the pound is available on the black market for half of the cost that the banks are offering. Naturally this uncertainty has led to a significant reduction in outside investment and kept those who trade currency on their toes. Global Impacts A struggling economy doesn’t necessarily have to directly impact the global economy for it to make a dent, any form of uncertainty can have a domino effect throughout the international community and Egypt is no different. The impact is being felt more on the Middle East and the Gulf states many of whom rely heavily on trade with Egypt that is now being slowed. The IMF recently gave Egypt a loan of $12 billion and as part of their terms, the country was forced to float its currency and leave the price at the whim of the market, this was yet more reason for lo-cal countries to keep their money away from Egypt. Despite having the Suez Canal, one of the World’s key trading routes, its revenues have dropped to a 3-year low and lost 5% on 2013 as a re-sult of a failed initiative for advanced charging. The Future There are a few possible outcomes for Egypt here, the IMF loan and a calmer nation from a securi-ty point of view could see the country’s tourism pick up and more dollar activity take place thus pushing the country towards growth. According to analysts however, there is a danger that coun-tries such as China will take advantage of the chance of getting a foothold in the Middle East and put together an Egyptian care package to do so. Steps are certainly being taken to improve the Egyptian pound and its economy, the results however, are yet to be seen. |
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