The situation in Libya will be taking its toll on the Egyptian economy, Sherine Nasr reports The cry for democracy in Libya has a cost, not only for Libyans but for Egyptians as well. The loss of millions of dollars in remittances of Egyptian nationals working in Libya, and the addition of thousands of returnees to the lists of unemployed, will deal another blow to an economy that has lately been struggling for balance. Based on initial findings on the Egyptian borders by the International Organisation for Migration (IOM), more than 50,000 migrants have fled Libya, "the vast majority are Egyptians," according to IOM's statement. Experts quoted in the Egyptian press have estimated the number of Egyptian returnees at 70,000. Despite the lack of a single clear cut figure of the number of Egyptian workers in Libya, according to the Ministry of Manpower, there are at least 1.5 million Egyptians who work and live in Libya and send an estimated LE1.5 billion in remittances every year. "Although there is highly skilled Egyptian labour in Libya, the majority are unskilled workers who are willing to take casual work to escape unemployment at home," said Heba El-Leithi, professor of statistics at Cairo University, who added that the flight of Egyptian workers will have wide repercussions on unemployment in Egypt. Before the 25 January Revolution, unemployment had reached an alarming 9.6 per cent, mainly among young people and the educated. According to Magda Qandil, executive director of the Egyptian Centre for Economic Studies (ECES), the current situation will aggravate the unemployment status in Egypt to a great extent. Qandil underlined that before the crisis, there were around three million unemployed workers in Egypt. "We estimate that at least six to seven million more have been negatively affected in the aftermath of the revolution in Egypt. If we add a million and a half of Egyptian returnees from Libya, then the rate of unemployment will jump shockingly," she said. El-Leithi underlined that the new situation will not only increase the rate of unemployment, but it will also change its structure. "More of the unskilled and vulnerable categories will be included," said El-Leithi, who added that the quick change in the scene in Libya compelled workers to depart abruptly, leaving behind money and belongings. The fact that the majority of these workers are the breadwinners of their families in many of the Egyptian governorates where almost 40 per cent of the population live on the poverty line (less than $2 a day), makes their conditions very critical. El-Leithi believes that many of those were farmers who will most probably be back to their original occupation to share tight wages and land strips with locals. "It is important for the interim government to realise that the returnees will be in dire need of quick unemployment aid for at least the next six months. Otherwise, they can be the source of considerable social unrest," said El-Leithi. Of all Egypt's hard currency earners, tourism and remittances from Egyptian workers in the Gulf countries, Saudi Arabia and Libya, come at the forefront with $11 billion and $8 billion of earnings respectively in 2009/10. "Although the majority of remittances come from the Gulf countries, Egyptians working in Libya outnumber those in any other Arab country," noted Qandil. Another fallout of the Libyan situation is the rising oil prices as more than half of Libya's crude output of 1.6 billion barrels per day has come to a halt. The Libyan crisis has sent the Organisation for Petroleum Exporting Countries (OPEC) daily basket of 12 crudes to $108.31 a barrel on 25 February compared to $90 per barrel a month before. Libya holds the largest oil reserves in Africa (46.4 billion barrels) and is the continent's largest oil producer following Nigeria and Angola. Assurances by OPEC to meet any shortage in the oil supply market made but little impact on oil prices. According to Qandil, the heated situation in the region fosters speculations which can drive oil prices to $150 per barrel. "This means that the oil subsidy bill will jump significantly," she said. Subsidy of energy products in Egypt reached $70 billion in 2009/10. Plans by the former government to eliminate energy subsidies are not foreseen at present. Qandil underlined that these different factors combined constitute a tremendous pressure on the Egyptian economy. The budget deficit before the revolution erupted was estimated at LE109 billion or 7.9 per cent of the GDP. "We expect the deficit to hit LE136 billion which stands for 10 per cent of the GDP estimated at LE1.3 trillion," said Qandil, who explained that decreased remittances, along with rising oil and food prices, will translate into a higher subsidy bill. In addition, the government's promised increase in wages and salaries will mean a heavy burden for the government.
