Tag: Egyptians

Egypt Takes $5.2 Billion IMF Loan to Support Economy

Posted on by webmaster

The International Monetary Fund in Washington DC has approved Cairo’s request for a $5.2 billion one-year loan. The loan that will have to be repaid within a year adds to a separate $2.77 billion package of “emergency support” granted to Egypt on May 11, to assist the country in its struggle to stop its COVID-19 epidemic.

The IMF considers Egypt to be somewhat of a pre-coronavirus success story as it complied with IMF demands for increased privatization, cutting public spending, and deregulation of industry. In May, an IMF statement said, “as the crisis abates, measures to lower the debt level would need to resume along with continued implementation of structural reforms to increase the role of the private sector.”

Egypt-IMF relationship

But the COVID-19 pandemic’s impact on tourism, global trade and oil prices has significantly impacted Egypt’s economy. Egypt relies heavily on revenues from its hotels and resorts on the Red Sea as well as tourism to its historic landmarks. Reductions in global trade have meant Egyptian state coffers see shipping fees from its vital Suez Canal reduced significantly while oil and gas revenues from Egypt’s growing energy sector similarly fell dramatically.

The fact that Egypt had recently completed a three-year economic reform plan as part of a $12 billion IMF loan that concluded in 2019 appears to have done little for the country’s economic resilience, but further austerity and privatization would eventually produce better results, according to the Fund.

Foreign priorities

Egyptian President Abdel Fattah el-Sisi had received praise from his Western backers and international bankers for implementing unpopular austerity measures that caused a dramatic rise in prices for essential goods for poor and middle class Egyptians, including a large increase in the price of electricity and drinking water. But the moves have helped “attract foreign investment,” justifying praise from the Egyptian government’s financiers.

Egypt’s transition to the neoliberal economy that foreign powers mandate has done little to produce an effective COVID-19 response. Like other countries that follow this economic mantra, such as Brazil, the US, the UK and India, COVID-19 cases have exploded with little government assistance to the country’s poorest and most vulnerable communities.

Local suffering

Egypt’s government has distributed monthly assistance of $31 for informal workers, who make up a significant section of those working in its hospitality industry. The limited support for Egyptian citizens has seen 73% of Egyptian households report a decline in their incomes over the past months.

Like Brazil, the US, and the UK, Egypt is now rushing to reopen its economy, even though it recorded 1,625 new cases on June 26, with 62,755 total confirmed cases and 2,620 deaths. The necessity to bring in revenue appears to have outweighed any desire to control the local epidemic as hygiene standards and social distancing are seen as sufficient to again receive foreign tourists.

Egyptian citizens will have to again brace for austerity measures that cut government support for the poor and increase the cost of living, while the government hopes that this time, the IMF’s demands will produce the “resilient” economy that its financiers have repeatedly promised.

Egyptian farmers hit hard by COVID-19 remittances slump

Posted on by webmaster

COVID-19 has pushed Egyptians migrant workers who would normally support their families by working in GCC countries or Europe back home and into the fields, slashing remittance income for poor farming families and cutting agricultural output.

Agriculture is considered the most resilient sector of Egypt’s economy but that has not stopped poor farming families from feeling the brunt of the global COVID-19 pandemic. In April, the International Food Policy Research Institute (IFPRI) warned that poor households—and especially those in rural areas— would likely suffer the most from lower remittances. 

Two months on, farmers such as Abdel-Qader Mustafa, from Qena in Upper Egypt, are feeling the reality of the global economic crisis caused by COVID-19.

Mustafa’s son used to work in Saudi Arabia, sending back roughly LE 2,000 ($124) to supplement his family’s income each month.  

“Due to the coronavirus, my son could not go back to his work in Saudi Arabia after the end of his annual vacation in February. Since then, he has been taking money from us,” Mustafa told Egypt Today.  

As a result, all seven members of Mustafa’s family have been pushed back into working the agricultural fields where they earn as little as LE 15 to LE 20 ($0.90 to $1.20) per day.  

Mustafa’s son is amongst the 20,000 Egyptian workers that have been either repatriated or deported from Gulf Cooperation Countries and European nations as a result of COVID-19 shutdowns and declining oil revenues.  

Egypt’s higher-income households who rely mostly on the services sector for their income have seen the largest COVID-19 losses in absolute terms, but the IFPRI says “the poor may find it harder to cope.”

The rural-urban differentiation 

“Rural households also lose, but less than their urban counterparts.” IFPRI says this is explained mostly by stronger economic growth in the agricultural sector and its ability to keep operating through the virus crisis. 

“While the income losses of the rural and urban poor are smaller compared to the non-poor in absolute terms, poor households are likely to find it harder than wealthier households to cope with such income losses.” 

That is in part because they already have significantly lower monthly incomes than their urban counterparts, meaning even a small reduction could push them closer to poverty. They are also more heavily reliant on remittances, a fact that Egyptian Farmers Syndicate chief Hussein Abdel-Rahman says is having a big impact on farming families. 

Abdel-Rahman recognizes “the decline in remittances would have a great impact on Egypt generally,” but says farmers and their families who constitute 55 million citizens, around 50% of Egypt’s population, are really feeling the pinch. 

“The plunge of the remittances led to weakness in the purchase power and a decline in the living conditions in the rural areas,” he told Egypt Today on Thursday.

The union boss also reports that the drop in remittances, and income more generally, has led to a decrease in cultivation with farmers planning to plant three instead of the usual five feddans (1 feddan = 1.037 acres) this year. According to Abdel-Rahman, reduced purchasing power is already pushing poor rural Egyptians towards low-quality imported meat, and lower crop plantings could drive food prices up further in the future. 

Another factor creating hardship for rural Egyptians are limits on cash withdrawals.  

“Also, farmers sometimes find difficulties in taking the remittances as he/she is not allowed [by the banks] to withdraw all [the] amount of the remittances at once from banks,” Abdel-Rahman said. 

 Read also: Lebanon and Egypt to Suffer Severe Impacts of COVID-19 Remittances Slump

 

Daily Nile Dam Negotiations Aim to Resolve Tensions

Posted on by webmaster

For almost a decade Ethiopia has been working on the construction of the largest dam in Africa, the Grand Ethiopian Renaissance Dam (GERD). Construction has progressed to the point where Ethiopian authorities are preparing to start filling the dam’s giant reservoir, sparking fears of possible water shortages in Sudan and Egypt.

On Monday, June 8, Ethiopian Prime Minister Abiy Ahmed announced that Ethiopia is ready to proceed with a partial filling of the reservoir. “The dam is a project that will pull Ethiopia out of poverty,” Ahmed told lawmakers. “Ethiopia wants to develop together with others, not hurt the interests of other countries.”

However, the opinion was not shared in Egypt, a country that relies heavily on water from the Nile river, downstream from the GERD. Egyptian President Abdel Fattah el-Sisi released a statement on Tuesday, June 9, accusing Ethiopia of “a new tactic of stalling and shirking responsibility” and accused the country of stalling negotiations in order to start filling the reservoir.

Washington deal

“It is a hugely important and sensitive issue,” said Mirette Mabrouk, director of the Middle East Institute’s Egypt Studies program. “It’s a matter of life and death for a lot of people, certainly for more than a million Egyptians.”

The escalation of the war of words between Egyptian and Ethiopian leadership comes after Sudan and Egypt held separate meetings on February 24 where the United States, an observer in the negotiations, presented what is now called “the Washington deal.”

The United States Treasury department released a statement saying the US “believes that the work completed over the last four months has resulted in an agreement that addresses all issues in a balanced and equitable manner, taking into account the interests of the three countries,” urging Ethiopia not to commence the filling of the reservoir “without an agreement.”

Tuesday’s meeting

On Tuesday June 9, Sudan’s Prime Minister Abdalla Hamdok got Egypt and Ethiopia back to the negotiating table, joined by EU, US, and South African observers. The meeting resulted in Egypt, Ethiopia, and Sudan agreeing to commit to daily meetings in order to ease tensions.

Ministers from the three countries spoke for five hours as Ethiopia claims sovereignty over the Nile water on its territory, while Egypt accuses Ethiopia of violating an agreement signed at the start of construction.

Ethiopia now claims the United States is overstepping its role as a mediating observer by presenting a deal to Ethiopia that was already signed by Egypt, a strategic ally of the US in the region. Sudan appears to accept much of the US proposal, which Ethiopia, in turn, objects to.

Differing opinions

Sudan and Egypt both want a “comprehensive agreement” before Ethiopian authorities start filling the reservoir, as they fear doing so would cause droughts in an already hot and dry year.

Sudan prefers the “Washington deal”, but Ethiopia rejects it because it did not take part in the February negotiations. Ethiopia also disputes the deal’s characterization that negotiations on guidelines and rules for filling the reservoir have been resolved.

For the foreseeable future, Sudanese, Egyptian and Ethiopian negotiators will now hold daily talks, with the exception of Fridays and Sundays, in order to defuse tensions where Ethiopia feels increasingly backed into a corner by powerful foreign actors aligned with Egypt. Sudan and Egypt, meanwhile, fear that the filling of the giant dam’s reservoir could worsen an already poor year for local agriculture and worsen the chance of famine and droughts in the region.

Most Popular