Egypt awaits broad international support as the repercussions of the “Gaza War” escalate
Between additional European support, Arab investments, and a loan from the IMF, Egypt is anticipating broad international support, hoping to alleviate the severity of its economic crisis, which has recently worsened as a result of the repercussions of the Israeli war on the Gaza Strip, especially with the decline in Suez Canal revenues by about 46 percent. Experts spoken to by Asharq Al-Awsat attributed the recent international steps to support the Egyptian economy to “the desire to preserve the stability of the region, which has been witnessing great tension recently.”
The most recent of these supports was what was announced by the Egyptian Ministry of Foreign Affairs, on Friday, through an official statement, which referred to “European support.” The Ministry’s spokesman, Ambassador Ahmed Abu Zeid, explained that the European Union Commissioner for Neighborhood and Enlargement Policy, Oliver Varheli, informed Foreign Minister Sameh Shoukry, during a phone call, that “the Union has decided to allocate additional financial and economic support to the country.”
The decision came during a summit of European Union countries held in Brussels, Thursday, to discuss additional financial allocations to neighboring countries, including Egypt, according to a statement by the Egyptian Ministry of Foreign Affairs, which indicated “a European consensus on increasing economic support for Egypt within the framework of raising relations between the two sides to the highest level.” Comprehensive strategic partnership.
The Egyptian Foreign Ministry’s statement did not specify the size of European financial support, but Bloomberg indicated in a report published in mid-November that “the Union proposed an investment plan aimed at pumping 9 billion euros ($9.8 billion) into several sectors in Egypt.” ». It quoted sources, which it described as informed, as saying that “the European Union is moving to accelerate the pace of deepening its relations with Egypt and helping it deal with the worsening repercussions of the war in Gaza, given the strategic importance of Cairo and concerns about increasing refugee flows.”
Political science professor Dr. Mustafa Kamel Al-Sayyid considered this “economic support for Egypt,” attributing the reason behind the United States and Europe’s tendency to support Egypt to “the multiple sources of tension in the Middle East, and the risks of political instability, in light of the increasing severity of the economic crisis, especially with the impact of the repercussions.” The war in Gaza over Suez Canal revenues. He told Asharq Al-Awsat: “In light of the fear of political instability that would lead to a rise in immigration rates to Europe, it was necessary to support Egypt and help it alleviate the severity of its economic crisis.” He stressed that “the crisis existed before, but the international situation, from the war in Ukraine to Gaza, exacerbated it.”
In turn, Egyptian economic expert Dr. Mustafa Badra told Asharq Al-Awsat that “these measures aim to alleviate the severity of the economic crisis in the country,” while he refused to consider these measures as “support or support” because they are “money for which Egypt will have to take certain steps.” He considered it “an attempt to give Egypt financial capabilities that would contribute to correcting the economy, with Cairo bearing part of the repercussions of the crisis.”
A report published by The Economist at the beginning of this month stated that “Egypt must receive an urgent economic rescue payment, as the Middle East cannot tolerate the collapse of the largest country in terms of population density.”
The European decision coincided with the International Monetary Fund’s announcement, on Friday, of “agreeing with Egypt on the main policy elements of the economic reform program,” indicating the imminent agreement to increase the value of the loan amounting to three billion dollars, which was signed in December 2022, and whose payments were delayed. Following Cairo’s failure to fulfill its conditions; The most important of which is “liberalization of the exchange rate.”
On Thursday, IMF Director Kristalina Georgieva said that the Fund and Egypt are in the “final stage” of negotiations to increase the loan program. Georgieva added, in press statements: “We realize that Egypt’s financial gap has increased,” noting that “in the first half of January, the country lost about $100 million a month in Suez Canal revenues.”
A Greek cargo tanker docked at the Port of Suez on January 22, 2024 (EPA)
She continued: “Egypt usually earns about $700 million a month from canal crossing fees, and Egyptian tourism suffers much more compared to tourism in neighboring countries due to Egypt’s proximity to the Israeli attacks on Gaza.” Georgieva continued: “They are losing hundreds of billions of dollars.” Therefore, we are also discussing strengthening our program in light of developments over the past months.”
Since the end of last November, the Yemeni Houthi group has been targeting ships in the Red Sea and Bab al-Mandab region, which it says are “owned or operated by Israeli companies.” The attacks come in response to the war in Gaza. These attacks prompted international shipping companies to avoid passing through the Red Sea and change the course of their ships to the Cape of Good Hope route.
The head of the Suez Canal General Authority, Lieutenant General Osama Rabie, said in televised statements on Friday: “For the first time, the Suez Canal is going through such a crisis. The number of ships in January 2023 reached 2,155, and decreased in January 2024 to 1,362, a difference of 36 percent.” He pointed out that revenues decreased from $804 million to $428 million during the same month, with a deficit of 46 percent.
Economist Badra says, “Egypt had a reform plan to remedy the economic crisis, and within this framework the agreement was on an IMF loan, of which it obtained the first installment in December 2022, but external challenges deepened the crisis and exacerbated the situation on the black market, especially with… Decline in remittances from Egyptians abroad.
Remittances from Egyptians abroad declined by about 30 percent, according to data from the Central Bank of Egypt last January, to be limited to about $4.5 billion during the three months from July to September 2023, compared to about $6.4 billion during the same period of 2022.
Badra pointed out that “to confront the worsening crisis, Egypt resorted to the IMF again, and the United States contributed to advancing the recent negotiations with the Fund.”
Treasury Secretary Janet Yellen pledged, during her meeting with the Egyptian Finance Minister in Washington last month, to “support the reform program that Egypt is pursuing to strengthen its economy,” according to a statement from the Egyptian Ministry of Finance. But the political science professor believes that “the International Monetary Fund has not backed down from its position regarding the economic reform steps in Egypt, most notably liberalizing the exchange rate, increasing the role of the private sector, and loosening the state’s grip on the economy.” He pointed out that “the latest agreement aims to help Egypt meet these conditions.”
The international support coincides with news of the sale of lands in the Egyptian city of Ras El Hekma on the Mediterranean coast to Arab investors, which Egypt has not confirmed, but an official source told the Cairo News Channel that “negotiations are already underway with a number of major international companies and investment funds to access… “An agreement will be announced soon to begin development of the region.”
Egyptian journalist Ahmed Moussa confirmed the deal, and said, in a post on his official account on “X”, on Friday: “Soon 20 billion dollars at once to end the exchange rate crisis, Egyptian, Arab and international development and partnership in Ras al-Hikma.” Development, direct investment and financing from abroad.
Badra stressed that “Cairo must take many measures to boost investment and make room for the private sector, to reduce the economic crisis.” He called for an increase in investment employment similar to the Ras Al-Hikma project, calling on the government to officially announce the details of the project due to its impact on the market, explaining that immediately after the news of the deal spread, the price of the dollar declined on the black market. Badra said: “Such decisions improve the pound’s pain in the face of hard currency.”
Egypt is suffering from a scarcity of dollars, amid a discrepancy in the exchange rate between the official and parallel markets, as the value of the pound has fallen by more than half since March 2022, and despite repeated reductions in the value of the local currency, the exchange rate in the parallel market has reached 70 pounds to the dollar, while… Its official price is still around 31 pounds.
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2024-02-04 08:21:31
