ASSESSMENTS

Egypt's Careful Economic Changes

Mar 20, 2013 | 15:38 GMT

Egypt's Careful Economic Changes
An Egyptian worker carries bread in a Cairo bakery

MAHMUD HAMS/AFP/Getty Images

Summary

Egypt is attempting to attract foreign direct and portfolio investment while delaying making foundational changes to the country's economic system. During a recent state visit to India that ended March 20, Egyptian President Mohammed Morsi made several ambitious statements about Egypt's future as an emerging economy in a public effort to spin the country's economic downturn as a moment of opportunity.

Meanwhile, Egypt is in negotiations with the International Monetary Fund, which is studying the possibility of extending a $4.8 billion loan to Egypt, pending improvements in the country's financial outlook. In order to secure the loan, Egypt must cut back on social spending. However, cutting spending will only worsen the country's political and security situation. A range of recent actions taken by the government demonstrate that Cairo is attempting to spur economic growth and investment where it can while postponing politically costly social spending adjustments. 
 

Egypt is inching closer to a deal with the International Monetary Fund, but significant hurdles remain. ...

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