We have recently spent class time discussing status quo responses to state failure and the effectiveness of these efforts. Egypt has recently engaged in several responses to state failure with the intention of encouraging development and peace.
A NEW CONSTITUTION
Egypt is rewriting its constitution for the fourth time in the past three years. This new charter, backed by the military-backed government, will remove some Islam references. As an Egyptian political analyst explained, “In terms of reducing the powers of the president and of the executive generally, in terms of holding many public officials accountable to popular questioning and accountability, these are all very positive features of the new constitution.” This new document will grant greater civil rights to citizens, and will only be passed if it receives majority support by the Egyptian people.
PAYMENT OF ARREARS
This week Egypt announced that it was going to pay back $1.5 of the $6 billion it owes to oil firms. These arrears were hindering foreign investments in the energy sector. The lack of investment along with the decrease in tourism has had an enormous impact on currency reserves and tax revenues, negatively affecting the country’s prosperity and development. This repayment of arrears is crucial for Egypt, as the country is hoping that this move will help drive cash into the country. UAE Minister of State Sultan Al Jabar explained how Egypt was becoming an attractive investment, and that “the most important thing [he’d] like to see happen is the topic of laws needed to assure investors and protect their capital.” In addition, the increase in importer demand will decrease the use of the black market, strengthening the Egyptian pound and diminishing the need for central bank intervention. Moreover, this move is part of a track to implementing a political roadmap to free elections and stability.
Egypt is hoping to turn the Suez Canal into a “global economic zone” through its Suez Canal Project. This project will help increase trade between Africa and Asia, more specifically focusing on ties between Egypt and India. The country is hoping to use this money to stabilize the politically changing country. In addition, this project will provide employment to the country’s youth.
In addition to relationships with India, Egypt is entering deals with Russia and China as well. Russia has just finalized a deal that would provide $4 billion in arms to the country. China is in the process of setting up the country’s first nuclear power plant with the hope of helping the country’s prevalent energy crisis. Many Gulf states are providing aid to Egypt as well.
IMF LOAN & CAPITAL CONTROLS
The International Monetary Fund has offered Egypt a $4.8 Billion Loan package under the conditions that the country makes certain economic reforms. The capital controls that Egypt would be forced to put in place could help stabilize the currency but could decrease needed foreign investment. Instead, Egypt is looking to relax controls. Egypt’s Deputy Prime Minister declared that they were going to hold off on this aid as the country doesn’t want to move too fast in its path to recovery. He explains that the money received from the Gulf, allows them to “implement [decisions] at the pace and in conditions that are much more favorable than when you are pressed to have to sign an agreement today or tomorrow.” Although the country has delayed payment for now, it states that it could use this IMF loan to implement a Value-Added Tax system in the country.
In conclusion, Egypt seems to be trying to stabilize the political mess in the country by implementing internal and external changes. Although these projects can be lengthy and difficult, most Egyptians are willing and ready to accept change after almost two years of instability and turmoil.