Africa
5:19 pm
Wed April 3, 2013

Egyptian Economy Continues To Struggle As It Negotiates With IMF

Originally published on Thu April 4, 2013 2:21 pm

Transcript

AUDIE CORNISH, HOST:

It's ALL THINGS CONSIDERED from NPR News. I'm Audie Cornish.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel.

When political instability and friction in Egypt turn violent, the country makes news and commentators reflect on the hard chill that has come of the Arab Spring two years on. But an equally important, if not quite so dramatic, test for Egypt's leadership is taking place not on the streets but in negotiations with the International Monetary Fund.

Egypt's foreign investment, foreign currency reserves, and income from tourism are all down. The country is seeking $4.8 billion from the IMF. And to persuade the international lender that it is serious and merits that loan, the Egyptian government has announced a reduction in subsidies for home cooking gas.

Joining us to talk about the Egyptian economy is Farah Halime. She is an economist and blogger in Cairo. Her blog is called Rebel Economy. Hi, welcome to the program.

FARAH HALIME: Hi, Robert.

SIEGEL: And, first, why don't you start by explaining what they're talking about when they say reducing the subsidy for home cooking gas? Who uses it and what does it mean?

HALIME: So essentially, Egypt's government has decided to raise the price of cooking gas, a cylinder of propane gas which poorer households in Egypt use to fire up their households basically, as opposed to a wealthier house which has natural gas pipes directly to it.

What the price rise is, is from about 73 cents, which is about five Egyptian pounds, to about $1.20. So it's very small increase, which is obviously because these people are not able to afford a huge jump. But also, it means that the government isn't going to make substantial savings.

SIEGEL: But does the government have a program of other reductions of expenses, or other increases in taxes that it can show to the IMF and say, here, look, we'll also get our house in order this way?

HALIME: Yeah. They have a whole closet, you know, reforms including fuel price hikes of petrol used in cars. And also, luxury tax on things like caviar and shrimp, and sunglasses even. But these are being phased in and there's really not a more severe implementation of reforms just yet. It seems to be that the government is implementing very small changes slowly. And the bigger changes like, for example, getting people to pay more tax later on, we haven't seen that yet.

SIEGEL: This is supposed to be evidenced to the IMF that Egypt is serious about getting its house in order. First, how bad are things in Egypt? And how important would the IMF loan be?

HALIME: Well, the IMF loan has - it's more than just money now. Egypt desperately needs to sign the IMF accord for billions of dollars to come through from not just the United States and Europe, but big international lending organizations such as the World Bank and the African Development Bank.

So these guys are all waiting for the IMF loan to be signed to disperse that money to Egypt. And without that, Egypt will continue to suffer and it already has in terms of tourism, in terms of its foreign currency reserves and unemployment.

SIEGEL: Egypt has a long history going back 40 years or more of negotiating with the International Monetary Fund. Does it appear that the IMF is being tougher on Mohamed Morsi's government, the Muslim Brotherhood-linked government, than it was on past Egyptian governments?

HALIME: Egypt has a really long history with the IMF going back to the '70s, '80s and then the '90s. And every single time it was a problem for the previous government to implement changes without a lot of social unrest. So today, we have a much darker economic situation. And Mohamed Morsi and his government are having to deal with a much bigger economic crisis. So it's not so much about setting up to fail as they have to make changes, otherwise Egypt will fail.

SIEGEL: Farah Halime, thanks so much for talking with us.

HALIME: Thank you.

SIEGEL: Farah Halime is an economist. She lives in Cairo and her blog, which is in English, is called Rebel Economy. Transcript provided by NPR, Copyright NPR.