US secretary of state, John Kerry, has emphasised that in order to get any sort of aid from the IMF, Egypt needs to get its tattered economy back on track. Even though it seems like the first priority for Egypt would be to get its political house in order, there is also mounting pressure on its economy to get back on track. The statement comes only a few days before Mursi has delayed another election that was set to take place in April. The political unrest is further leading to a deteriorating economy and social unrest.
There is a fear that the black market will get active again if the tension goes on any further and food supplies are already seeing certain restriction and supply shortage. In addition to that, the capital flight from the economy will need time to come back and the uncertain environment will keep many domestic or foreign funds away from the borders unless substantial improvement is achieved. In light of the situation, the statement by Mr. Kerry seems like a further blow to an economy that needs some sort of support system to help it through this time.
There needs to be a certain degree of hand holding involved to help Egypt in its transition process and this will include political, social and economic aid so Egyptian democracy can take its first few baby steps. The visit by the secretary of state included a meeting with Egyptian and American business leaders where he pointed out that there needs to be efforts shown by the economy as a whole to move on. This would then be complimented by IMF coming to Egypt’s aid as well.
A package had been agreed between IMF and Egypt in November, however, it has not gone through due to the protests that have taken place since then. Due to human rights violation committed by the state, IMF had to put the deal on standby until the situation was rectified. Kerry did say that the US will do whatever it can to help the state but it was up to the country to take the mantle itself.
Some of the measures that have been proposed by IMF are unpopular with Egyptians like a rise in tax revenues to sustain itself and to decrease subsidies on energy that will face serious backlash from the people. In a situation where people are ready to protest any political force, the measures could also prove to be political suicide and could lead to economic hardships for some time to come.
Anti-Mursi protestors also made their voices heard by burning photographs of Mr Kerry and this can prove to be fuel for the burning against the government and its policies. There are factions currently in terms of the economic and political powers that are present in Egypt and there is a need to bring them together and a consensus to be formed before the country moves forward. At one hand, the political parties need to form a coalition to charter the democratic way forward for the country which is accepted by the masses. On the other hand, the economic solution also has to be determined and steps need to be taken for it. There needs to be a middle ground where certain sacrifices are made for a long term plan by all the parties involved.