Egypt next week will have been in partial lockdown for two months due to the coronavirus pandemic. The Egyptian prime minister told a pool of reporters last Thursday that the government is planning to start opening the economy early June, provided the numbers of those infected by the coronavirus remain under control. As of time of writing, the numbers are still under control, but there is widespread fear that in the absence of more rigorous testing, tracking and enforcement of the lockdown, particularly in the Holy Month of Ramadan, the number of those infected could outpace the capacities of Egyptian hospitals to handle. The Egyptian government is facing uncertain times from an economic point of view. The partial lockdown has brought the economy almost to a standstill, at least in its early phase, and the fiscal stimulus that was provided early won't possibly compensate the economic and financial losses incurred by both the public treasury and the economy at large. The major sources of Egypt's foreign reserves have performed poorly, and the foreign reserves at the Central Bank of Egypt stand at $37 billion. Two months back, they stood at $45 billion which could finance imports for eight months. In less than two months, reserves declined $7 billion, $1.6 billion of which were servicing foreign debts. Tourism, which brought almost one billion dollars per month, is almost non-existent and its future prospects remain highly uncertain. In the meantime, remittances from overseas workers are down due to massive layoffs in Gulf States. The level of exports is down because of poor demand in the major markets for Egyptian goods, in particular in the European Union and the United States. As far as the Suez Canal is concerned, another major source of foreign reserves, the numbers of ships navigating this important international waterway has not remained unchanged compared to three months back. However, the lowering of fees for the ships that use the canal has helped in keeping total fees more or less at the same level. And due to low demand for oil and gas worldwide, Egypt has stopped exporting gas, another source of foreign currency beginning in the last quarter of 2019. Fortunately, domestic consumption of oil is down by 40 per cent in the last two months due to the partial lockdown from 9pm to 6am, the stay-at-home orders and staggered business hours both in government and in the private sector. A couple of days ago, a senior government official gathered a group of reporters to explain the challenges facing public finances. He said that the major sources of government taxes and fees have stopped coming in. He warned that if the overall situation in the country does not change for the better in the coming few weeks, the Egyptian government would have to take what he termed “drastic measures”, without elaborating on the nature of those measures. It goes without saying that the room for manoeuvre for the government is not that big if the existing lockdown remains in place. The stimulus package that the government has adopted runs from three to six months. The government can't possibly bear the catastrophic economic and financial results more than that. This explains why the Egyptian prime minister, backed by implicit messages in the pro-government media, is preparing public opinion to get ready to go back to normal, gradually, starting early June. It is interesting to note in this respect that the government has already encouraged the resumption of public works. It is a wise move by the government inasmuch as these are labour-intensive and they employ not less than five million Egyptians. On the other hand, hotels are allowed to work at 25 per cent capacity, effective mid-May, and to reach 50 per cent capacity next month with draconian precautionary health measures applied to guests and employees as well. Once back in business, the registered hotels in the programme launched by the Ministry of Tourism would contribute in bringing down the unemployment rate among the workforce in Egypt, particularly the youth from the countryside who make up the bulk of the employees in the hotels located in the Red Sea area and southern Sinai. Needless to say, opening the hotels will impact positively on feeding industries that thrive on high occupancy rates in hotels. Once the hospitality business and major public works get back to normal, millions of Egyptians will go back to work — a political as well as an economic imperative in these very trying times. Social media in Egypt is a reflection of the national mood. Judging from what is written on Facebook, a near-majority is against the opening up of the economy for fear the coronavirus gets out of control. They have persistently called on the government to decree a total lockdown, downplaying or ignoring the huge economic costs behind such decision. So, the government is trying hard to balance the fears of this virtual majority and the imperatives of the economic and financial sustainability of the country. In this context, the government has approached the International Monetary Fund for loans up to $3 billion, if not more, repayable in two years. The World Bank released a report recently in which it said the total foreign debts of Egypt stand at $112 billion, an astronomical figure to say the least. In the span of one year, 2018-2019, the total jumped by $16 billion. Make no mistake about it. Egypt should go back to work, as quickly as possible, if it wants to escape harsh and insurmountable economic realities in the next 12 months. With oil prices at record lows lately, and a looming recession in the Gulf states, some of which are close allies of Egypt, the chances of emergency financial help from Egypt's allies are almost nil. The next fiscal year, that starts 1 July, will be a major challenge for the Egyptian government. A ballooning deficit is inescapable given global economic uncertainties and the unpredictability of the coronavirus pandemic. We should start planning for the worst, and hope for the best. The security, economic and financial sustainability, and socio-political stability of the country depend on it. 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The writer is former assistant foreign minister.
*A version of this article appears in print in the 14 May, 2020 edition of Al-Ahram Weekly
