Egypt’s foreign reserves are losing value at an astonishing pace. Even though they saw a small boost to $14.4 billion at the end of April thanks to a cash deposit from Libya, they hit a a 10-year low of $13.4 billion in March. The Egyptian pound hits new lows weekly. Unemployment is off the charts. Food prices are rising faster than froth; inflation accelerated to 8.1% in April. Gasoline is in daily short supply.
Egypt needs economic reforms if it is to get out of this dire situation and set itself up to receive a $4.8 billion loan from the International Monetary Fund. With that in mind, President Morsi shuffled his cabinet this week, including overhauling his economic team. Those in government believe this shows a desire to bring some fresh air into the negotiations with the IMF, though many outsiders don’t expect any significant changes.
The reshuffle strengthens the Muslim Brotherhood’s representation in the cabinet. Among the newcomers, taking over as finance minister, is Fayyad Abdel Moneim, a specialist in Islamic economics. He will be in charge of heading the talks with IMF head Christine Lagarde’s team. His career has been focused on Islamic finance, though a cabinet spokesman said Abdel Moneim’s replacement of Al-Mursi Al-Sayed Hegazy, himself only appointed in January, would have no impact on the IMF discussions or “change in the announced government program.”
The revolving door at the finance ministry does’t make the negotiations any easier, though. “IMF officials have told me that each time they get used to a minister, he disappears,” Samir Radwan, Egypt’s first post-revolution finance minister was told Ahram Online. “We now have our fifth finance minister since the revolution; this is a sign of instability.”
The bigger problem is implementing the necessary reforms. Part of the problem with that is the Muslim Brotherhood’s desire to control power, something that this week’s move exacerbates. It has little appetite for unpopular reforms that the IMF requires such as cutting fuel subsidies, and especially not before parliamentary elections which have been postponed amid a revised election law.
When Egypt will pledge its commitment to reform and when the IMF’s loan will be signed are the two big interconnected questions. IMF spokesman Gerry Rice said on May 9 that Egypt’s financial situation is deteriorating and the fund won’t move ahead with the loan until it gets a firm timetable on the reforms from Morsi’s government. Even though both sides recently said that the loan agreement would be struck “in the coming weeks” it likely won’t happen until after the elections.
In the meantime, Egypt will have to hope to get by on the financial kindness of its friends such as Libya and Qatar, which promised to buy $3 billion in bonds though the two have bickered over the five percent interest Qatar wants. Perhaps Abdel Moneim can renegotiate that as a sukuk.