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February 18, 2015 at 08:20 PM
Political turmoil has taken a toll on Egypt’s economy over the last few years. The 2011 revolution and its aftermath, changes in leaders and continuing violence and demonstrations have all affected everything from tourism to outside investment, not to mention boosting unemployment and creating a challenging economic environment for the country’s people.
But change is afoot, with ambitious plans not just for political and economic reform but also for a new Suez Canal—and development in the area that, it’s hoped, will transform it into a regional, if not a global, center for logistics.
The country’s current president, Abdel Fattah al-Sisi, has come in for criticism that he is perpetuating the atmosphere of authoritarianism that existed under the regime of Hosni Mubarak, who was ousted in 2011. However, others say that Sisi must act forcefully to restore a climate in which business can flourish. While it remains to be seen whether security forces in the country help or hinder his efforts to assist the economy, plans are afoot to revitalize business—and to woo foreign investors back.
Cairo has announced its intention to terminate fuel subsidies within the next five years so that money can instead be used to increase spending on education and healthcare. A value-added tax is also planned for this year, as well as the issue of a $1.5 billion international bond announced by finance minister Hany Kadry Dimian.
Dimian also predicted that the economy would continue to grow, reaching 5–5.5% during the fiscal year ending in June 2016, after growth of more than 4% for the current fiscal year. While the economy has been suffering, of late there have been signs of improvement: its benchmark EGX 30 stock index has gained close to 40% over the past year, and in December Fitch Ratings upgraded the country’s credit rating from B- to B.
But Cairo isn’t out of the woods yet. Egypt has been partly dependent on financial support from its neighbors, including Saudi Arabia and the UAE, with the advent of low oil prices. And while ambitious, the twin projects of the Suez Canal Area Development and the Second Suez Canal offer more long-term payoffs than immediate ones.
