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Reform First

One Egyptian Pound, courtesy of Winter Sorbeck/Wikimedia

This article was originally published 31 May 2014 by Peacefare.net.

Steven Cook, who knows lots about Egypt, offers an insightful analysis of its impending financial and economic problems. In a word, Egypt could go broke and the state could disintegrate:

“Egypt’s economy remains shaky and the threat of a solvency crisis lingers. Indeed, the continuation of violence, political protests, and general political uncertainty—even after planned presidential and parliamentary elections—along with a hodgepodge of incoherent economic policies, all portend continuing economic decline. This in turn could create a debilitating feedback loop of more political instability, violence, and economic deterioration, thus increasing the chances of an economic calamity and yet again more political turmoil, including mass demonstrations, harsher crackdowns, leadership struggles, and possibly the disintegration of state power.”

Only Gulf generosity has kept Egypt’s foreign currency reserves above the minimum required, tourism is in a tailspin, debt is close to 100% of GDP and subsidies (especially for fuel) burden the state’s budget. There are many ways in which Egypt could be sent into default. I recommend you read Steven’s trenchant account.