After Egypt’s President Abdel-Fattah al-Sisi welcomed hundreds of dignitaries from around the world to Sharm el-Sheikh the seaside resort, in 2015, he made a simple pitch to them.
He said the upheaval following Arab Spring in Egypt had ended. He had ousted the Islamist president that was his predecessor and the country wanted their investments.
He promised economic reforms and stability. His guests shortly thereafter rewarded the country with loans, new business and large sums of cash. It was what the head of the International Monetary Fund Christine Legarde said was a moment of great opportunity.
However, Egypt has squandered the opportunity. An IMF team has returned to Egypt and is negotiating another package of loans, which are believed to be $12 billion over a period of three years.
Sisi is in desperate need of cash. Egypt’s government is facing large current account and budget deficits at nearly 7% and 12% of the country’s GDP respectively, as the foreign reserves in Egypt run low.
A currency that is overvalued, inflation in the double digits and an unemployment rate of more than 12% complete the negative image. Today, most if not all possible investors are shying away from the country.
The government of Egypt inspires little to no confidence. The new package for the IMF would have contingencies attached to reforms that have been talked about by politicians for years, but always failed to be implemented.
Value-added tax would raise revenue that is much needed. Parliament has a proposal now but an uproar has been caused owing to worries of inflation, which has reached 14%.
Similar concerns caused Sisi to shy away from his promise of ending fuel subsidies after cutting them back during 2014.
Parliament has held up any reform of the bloated civil service in Egypt, despite the pledge by Sisi that no one would be let go.
Because of such a large scale in inertia, a separate package was withheld by the World Bank for support. The same could be done by the African Development Bank. Even the Middle East’s Gulf States, which support Sisi strongly and have delivered aids in the billions to Egypt, seem to be losing their faith as well.
The UAE has pulled its advisers from Egypt said reports and its most recent installments of aid are slow to arrive.