CAIRO // Egypt is engaged in a high stakes gamble, using billions of dollars from allies to stimulate the economy and keep its politically charged streets calm in the hope that investors and tourists return.
The country’s finances are in a precarious state with a massive deficit but the government, armed with billions in aid from Arabian Gulf countries, has rejected the conventional wisdom of austerity measures prescribed by the International Monetary Fund (IMF).
If the plan fails, a new government, which is expected to be elected early next year, could find itself deep in debt, its currency overvalued and with an economy in crisis.
“Now we are living on a ventilator, with aid from neighbouring countries and that is understandable in the middle of a meagre tourism industry and reluctance of direct foreign investment,” said Sherif Samy, the head of Egypt’s Financial Supervisory Authority.
Saudi Arabia, Kuwait and the UAE pledged more than US$12 billion (Dh44bn) in aid after the army removed Mohammed Morsi from the presidency on July 3 following mass protests against his rule.
Since the 2011 uprising that toppled Hosni Mubarak, Egypt has burnt through $20bn in foreign reserves, borrowed billions from its allies and racked up billions in debts to foreign oil companies to prop up its currency.
The Morsi government worked out an agreement with the IMF that would have included austerity measures, higher taxes and a reduction of subsidies that eat up a quarter of the budget. It was never implemented.
The army-backed government, aware that IMF conditions could cause a huge popular backlash in a country where protests have forced out two presidents in three years and sent the economy into a tailspin, has avoided austerity measures.
“The government is faced with a big challenge, especially as it faces coming elections within months,” Mr Samy said.
“They must not be excessive with the social subsidy programmes and wage and pension increases that might titillate the feelings of ordinary citizens in the short term but have a severe impact on the state budget and on the deficit.”
What happens in Egypt could affect the rest of the region, which has also had political and economic turmoil since the Arab Spring uprisings.
Supported by the Arabian Gulf aid pledges, the government announced a stimulus package worth Dh11.9bn in August. It later increased it by a third to Dh15.8bn and plans another Dh12.8bn package early next year.
But it has not spelt out details of any other long-term plans to strengthen the economy.
The interim government has raised the public sector minimum wage and pensions, and the central bank has lowered its key interest rates by a full percentage point since August to encourage growth.
In addition, the government has said it would focus on a series of labour-intensive infrastructure projects and unfinished public projects designed to quickly improve the living standards of Egypt’s 85 million citizens.
Some businessmen have said there are indications that investors and tourists, once its main source of foreign exchange, would return once the political turmoil subsides.
“Foreign investors are primarily concerned about stability, no violence, where they feel their investments are safe, where there is an ease of going in and out,” said Hussein Choucri, the head of Cairo-based HC Securities, a mid-sized investment bank.
However, many investors are worried about security and recoil from the way Egypt has treated businessmen since the uprising.
State companies that Arabian Gulf investors bought under the Mubarak administration have been renationalised and property sales renegotiated after private lawyers challenged the transactions in court.
The interim government has been taking steps to reassure investors.
“We are revising all economic legislation,” said Osama Saleh, the investment minister.
The tourism minister of Egypt, Hisham Zaazou, said last month the government planned to launch a marketing campaign in the hope of attracting 13.5 million tourists next year. Only 9.8 million tourists came in 2011, down from 14.7 million the previous year.
During Mr Morsi’s year in power, the budget deficit widened to almost 14 per cent of gross domestic product. The government hopes to reduce that to about 10 per cent this year.
It also hopes investors and tourists will bring foreign currency, taking pressure off the Egyptian pound, which has lost almost 16 per cent of its value since the uprising and even more on the black market.
The country may not be able to count on its Gulf allies for ever.When an Egyptian delegation visited last month, there was a stark warning from the UAE. Sheikh Mansour, the Deputy Prime Minister and Minister of Presidential Affairs , said Egypt could not live on Gulf aid alone.
“Egypt must think of innovative and unusual ways to boost the economy,” he said.
* Reuters
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Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
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UAE currency: the story behind the money in your pockets
What is double taxation?
- Americans living abroad file taxes with the Internal Revenue Service, which can cost hundreds of dollars to complete even though about 60 per cent do not owe taxes, according to the Taxpayer Advocate Service
- Those obligations apply to millions of Americans residing overseas – estimates range from 3.9 million to 5.5 million – including so-called "accidental Americans" who are unaware they hold dual citizenship
- The double taxation policy has been a contentious issue for decades, with many overseas Americans feeling that it punishes them for pursuing opportunities abroad
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Asia Cup Qualifier
Venue: Kuala Lumpur
Result: Winners play at Asia Cup in Dubai and Abu Dhabi in September
Fixtures:
Wed Aug 29: Malaysia v Hong Kong, Nepal v Oman, UAE v Singapore
Thu Aug 30: UAE v Nepal, Hong Kong v Singapore, Malaysia v Oman
Sat Sep 1: UAE v Hong Kong, Oman v Singapore, Malaysia v Nepal
Sun Sep 2: Hong Kong v Oman, Malaysia v UAE, Nepal v Singapore
Tue Sep 4: Malaysia v Singapore, UAE v Oman, Nepal v Hong Kong
Thu Sep 6: Final
Asia Cup
Venue: Dubai and Abu Dhabi
Schedule: Sep 15-28
Teams: Afghanistan, Bangladesh, India, Pakistan, Sri Lanka, plus the winner of the Qualifier
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A timeline of the Historical Dictionary of the Arabic Language
- 2018: Formal work begins
- November 2021: First 17 volumes launched
- November 2022: Additional 19 volumes released
- October 2023: Another 31 volumes released
- November 2024: All 127 volumes completed
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Sunday:
GP3 race: 12:10pm
Formula 2 race: 1:35pm
Formula 1 race: 5:10pm
Performance: Guns N' Roses
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If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
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COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
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The story in numbers
18
This is how many recognised sects Lebanon is home to, along with about four million citizens
450,000
More than this many Palestinian refugees are registered with UNRWA in Lebanon, with about 45 per cent of them living in the country’s 12 refugee camps
1.5 million
There are just under 1 million Syrian refugees registered with the UN, although the government puts the figure upwards of 1.5m
73
The percentage of stateless people in Lebanon, who are not of Palestinian origin, born to a Lebanese mother, according to a 2012-2013 study by human rights organisation Frontiers Ruwad Association
18,000
The number of marriages recorded between Lebanese women and foreigners between the years 1995 and 2008, according to a 2009 study backed by the UN Development Programme
77,400
The number of people believed to be affected by the current nationality law, according to the 2009 UN study
4,926
This is how many Lebanese-Palestinian households there were in Lebanon in 2016, according to a census by the Lebanese-Palestinian dialogue committee
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Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
UAE currency: the story behind the money in your pockets
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
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'O'
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