There are enough signs to conclude that the political dynamic unleashed by the Tahrir Square revolution may infuse Egypt's economy with a new vigor if the elected leadership rises to the occasion and international community extends a helping hand. We are talking about an economy that was none too robust even in the best of times. Last year's upheaval and the ensuring political instability only made things worse. Tourism and direct foreign investment, two key sources of foreign reserves, were the worst hit sectors. Economic growth, which was recovering after the global financial crisis of 2008, fell from 5.1 percent during fiscal year 2009/10 to an estimated 1.8 percent in 2010/11 and is projected at 1.7 percent for the year ending in June 2012. The good news is that the country is now experiencing a palpable mood swing, resulting in increased consumer and investor confidence. The stock market is enjoying a boom, up 37 percent since the uncertainty surrounding presidential elections in June that brought Mohamed Morsi to power. Foreign countries have shed their initial reluctance and are coming forward to help Egypt. Qatar said Thursday it will invest $18 billion in Egypt over the next five years. The money is to be invested mainly in electricity, natural gas and tourism. Last week China promised Cairo a $200 million loan and signed various deals involving agriculture, the environment and telecommunications. More important, perhaps, is the Obama administration's announcement last Monday that it is close to an agreement with the new government on an assistance package. President Barack Obama has also offered $375 million in financing and loan guarantees for American companies and banks that invest in Egypt and a $60 million investment fund for Egyptians to invest in new enterprises. A large US delegation, including six trade officials and representatives of dozens of multinationals, visited Egypt Sunday to drum up business. Meanwhile, the Egyptian government has requested a $4.8 billion loan from the the International Monetary Fund. The deal is expected by the end of the year. Washington has signaled its backing for the loan. IMF chief Christine Lagarde who visited Cairo last month has said it would be a partner in “an Egyptian journey” of economic reform. All this argues for cautious optimism.There has been relative calm in the country since Morsi, the first freely elected president in Egypt's history, took office in June. This has helped improve business sentiment. But this alone would not help revive the economy unless the government implements the structural reforms that would boost investment and create economic opportunities for young people who are desperate for change. About 60 percent of the population are aged under 30 and a high proportion of the 15-29 age group are unemployed. Hurdles facing the new government are not easy to surmount. For example, possible cuts in subsidies may turn the large impoverished swath of the population against the government. It has to ensure that any further liberalization of the economy does not widen the gap between rich and poor. What is needed is a long-term strategy to secure inclusive economic growth for all Egyptians — a strategy devoid of ideological shibboleths and one that avoids too much reliance on Western governments.
