July 4,
2013
A protester carries a poster of ousted
Egyptian presidents Mohammed Morsi and Hosni Mubarak in Tahrir Square. (GIANLUIGI GUERCIA/AFP/Getty Images)
Summary
Egypt's crisis goes much deeper than the recent
political chaos. With the leader of the Supreme Constitutional Court taking over the presidency at the behest of
the military, the new government will likely represent a coalition of interests
facing many of the same challenges that brought about Mohammed Morsi's
downfall. Egypt's population has grown well beyond the means of the state to support
its needs, and even a strong state will struggle to ensure sufficient supplies
of basic staples, particularly fuel and wheat.
Analysis
Underlying the question of what political structure will emerge from
this week's crisis, the fundamental fact is that Egypt is running out of money. Dwindling foreign
reserves point to a negative balance of payments that is sapping central bank
resources. At the same time, Egypt's reliance on foreign supplies of fuel and
wheat is only growing. Egyptian
petroleum production peaked in 1996 and the country first became a net
importer in 2007. Government fuel subsidies are an enormous burden on state
finances and, throughout the past year, failures to pay suppliers and a
shortage of foreign exchange available to importers have caused supply
shortfalls and price spikes throughout the country.
The government has a few options, including backing
off subsidies in hopes that higher prices will help reduce consumption and
therefore cut down on the net drain on state finances. That route carries a
high risk of a major political backlash, so it is more likely that the
government will continue, if not increase, its commitment to using state funds
to guarantee sufficient supply and low prices.
The second major challenge stems from Egypt's
extreme vulnerability to international food markets. Though dire warnings
of food shortages have been frequent in the media, they have not yet appeared
with any significant frequency within Egypt. However, this is not to say that they will
not eventually appear. Bread is a staple of the Egyptian diet, and Egypt relies on imports for more than half of its
wheat consumption. Although farmland within Egypt is increasingly dedicated to growing wheat,
there is simply not enough arable land for Egypt to feed its population.
In fact, although Egypt is a vast country geographically, most of
it is uninhabitable desert. Population growth is accelerating in Egypt's densely packed urban centers, threatening
to worsen these underlying challenges. Population growth in 2012 hit its
highest levels since 1991, reaching 32 births per 1,000 people and bringing the
country's population to 84 million, according to initial government estimates.
This represents an increase of 50 percent from 1990, when the population was
just 56 million. Egypt's fertility rate is currently 2.9 children per woman and is expected to
remain above the replacement ratio of 2.1 for at least the next two decades. As
a result, the United Nations projects the Egyptian population to exceed 100
million by 2030. This means that Egypt will have a growing pool of young people of
working age in the coming decades, creating substantial challenges for the
Egyptian state to provide them with economic opportunities, or at the least
sufficient basic goods.
Ousted Egyptian leader Hosni Mubarak faced similar problems, and growing
poverty and joblessness are arguably among the root causes of the uprising in
2011 that unseated him. The wave of protests that challenged Morsi, who became
the first democratically elected president in the country's history, should be
understood as a continuation of this swelling trend. While previous governments
in Egypt have been able to leverage
strategic rent from foreign countries interested in maintaining stability
in Egypt, which is the linchpin between the Middle East and North Africa and the manager of the Suez Canal, the
country has become increasingly peripheral to the strategic needs of major
powers.
As a result, although Egypt has been able to secure some limited
funding from regional players such as Qatar, Iraq, Saudi Arabia and Libya, it remains locked in negotiations with the
International Monetary Fund over some broader, more sustainable financial
relief. It is possible that the new government will find a level of stability
that the increasingly isolated Muslim Brotherhood leadership was unable to
sustain in the face of rising disputes with former coalition partners and a
firmly obstructionist judiciary. However, the military's decision to unseat
Morsi underlined the instability inherent in Egypt's political system and may make it even
more difficult for Egypt to return to the good graces of financial
markets or Western powers. In any case, mounting demographic and economic
pressures mean that the job of managing Egypt's economic challenges will become
incrementally more difficult with each passing year and for each faction that
occupies the presidential palace.
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