Egypt has always been considered as a place of a diverse range of agricultural products, local and international trade, and relatively stable social institutions. The country's current condition, however, is different. Egypt is facing a series of interconnected economic, social, and political issues that jeopardize the country's overall development. 1 The issues eroding the country's stability include rampant revolutions, military attacks, mounting public debt, high poverty levels, corruption, inflation, and food insecurity, to name a few. To be successful, Egypt's administration and policymakers must confront political issues while also adopting policies to reduce social and economic unrest.This report seeks to identify the economic, social, and political challenges facing Egypt while recommending substantiated policy prescriptions to address these problems.
Economic challenges
Egypt is currently in a state of financial crisis. The rising public debt due to fiscal deficit challenges the economic stability of the country. Currently, the public debt stands at “14 % and above 100 percent of the country’s gross domestic product.”2The financial deficit could be blamed on three factors. First, the government has been running “a policy to provide social protection to the poor such as free health, education, housing, and food.”3However, the plan is not fiscally affordable due to high population growth rate in the country. For the government to sustain the policy for the greater population, it has to borrow money. Secondly, tourism sector was significantly affected by Mubarak's rule and rampant military attacks thus reduced foreign income. Lastly, direct foreign investment into the country was affected by the 2011 revolution against Mubarak’s regime thus reduced revenue from the investments.
Inflation is ever increasing economic factor in Egypt. Consumers good and services have increased in overall prices. In 2012, the “inflation rate stood at 6.4percent and was not expected to reduce in coming years.”4 Although inflation is a global crisis, in Egypt's economy necessities such as food and water have significantly increased their prices. As a result, consumers’ purchasing power is reduced thus higher living standards. The situation is expected to worsen with rising international customer's goods prices.
Egypt’s widespread poverty and unemployment levels represent equally pressing issues facing the country. The two socio-economic factors were among the main forces that caused the revolution against Mubarak in 2011. “Almost a quarter of Egyptians live below the poverty line with more just above the line.”5 Government policies to reduce poverty levels such as free education, health and food have proven ineffective with ever rising disadvantaged population. It has also increased poor's dependence on the government. Moreover, the high youth unemployment increases the poverty levels. More university graduates are being forced into informal employment which is characterized by low pay and no work benefits.6
Social challenges
Families in Egypt get “three or more children making Egypt the 15th most populous country globally.”7 The population growth rate is 2percent more than that of the United States and forms the primary contributing factor of overpopulation. The overpopulation crisis affects mainly those living in the cities. People migrate from the countryside to the urban areas in search of employment thus overcrowding the areas. Given that most cities in Egypt are located along River Nile, and the river is overstrained to the extent of degradation. River Nile is the primary source of water in the country, and its degradation causes water crisis as well as less food production. Overpopulation have also diluted economic growth and public policies leading to scarce resources and strained living conditions for most Egyptians in all fronts
Additionally, overpopulation has led to a significant number of slums in Egypt. Yet, Egypt’s poor housing conditions can also be as a result of unemployment, high living standards, and low income. According to a report by a Local Development Authority, random housing and slums constitute 40percent of the total housing in the Urban Egypt.”8Recently elected President Morsi also echoed the figure. Initially, the slums were the hotbeds of crimes. But, the problem has become broader with rising level of health concerns and deaths due to collapsing buildings.
Egypt’s health sector has not been spared either. Although Egypt is one of the countries with low HIV and Malaria prevalence in Africa, diseases such as diabetes, Hepatitis, Bilharzia, are leading nationwide diseases.”9Treating the diseases cost the government more than any other sectors in the country. In addition to the health menace, the hospitals are few as compared to patients load. The hospitals are also poorly equipped, overcrowded and often with scarce healthcare personnel. Consequently, the mortality rate is high with the country losing productive individuals that could have otherwise boosted the country's development.
Political challenges
Political violence, corruption, and judicial bureaucracy sum up the significant political challenges Egypt is experiencing. While still recovering from a political revolution against Mubarak regime in 2011, “Egypt administration is facing a significant Muslim Brotherhood opposition.”10The militants’ attacks have focused on energy facilities, public areas, and security forces. The attacks are a major blow to the energy, tourism, and business sectors. The attacks on three tourism centers- Cairo, Sinai Peninsula, and Upper Egypt have reduced tourism business activities and the numbers of tourists visiting the areas. Also, attacks on pipelines have significantly reduced oil and gasoline exports due to leakages and spillage.
Moreover, Egypt judicial system is inefficient with lengthy procedures and understaffed with judges. The slowness and overloaded judges have left many cases pending for years. “Major decisions concerning the judiciary are influenced by the executive branch of the Egyptian government.”11Consequently, reforming the judiciary system is a massive challenge. Also, Egypt prisons are overpopulated due to a large number of unconcluded criminal cases. The government has to allocate extra money to sustain the prisoners hence increased government expenditure.
Policy recommendations
A significant challenge for Egypt is to whether spend its limited finances on social and development programs or pay her national debts. There is a need to establish policies that could balance the two country’s growth factors. The systems need to be substantiated to minimize chances of failure which could add up the cost of developing and implementing new policies.
Economic policies
National debt
Adjusting Egypt's fiscal policy is a sure way of reducing the national financial deficit that leads to borrowing. The government can achieve the fiscal policy through a combination of public expenditure cuts and tax raises. The tax raises only is a common tactic in most countries. Despite the frequency, countries still find themselves in great debts. Increased cash flows from taxes without reducing spending, makes little difference in the financial deficit. In practice, Sweden faced “a financial crisis in 1994 due to large national debt.”12The country attained a balanced budget by late 90s through a combination of both reduced government spending and increased taxes.
However, other countries only use reduced spending without raising taxes. High taxes often scare away investors who could otherwise increase cash flows to a country. For instance, “Canada in the 90s reduced its fiscal deficit through deep cuts to its budget.”13 Within a period of three years, the country had settled its national debts.The Canadian government was successful without raising taxes. Since Egypt needs finances, putting into practice both reduced government spending and increased taxes are appropriate ways of reducing national debt rather than depending on foreign borrowing. But, the raised taxes should be for a specific period. Otherwise, the policy might scare away potential investors.
Inflation
It is reasonable for Egypt to place restrictions on money supply in its economy to check inflation. Many countries have adopted a policy of increasing interest rates on loans to reduce borrowing by banks, creditors, and investors. Given that Egypt needs to increase its private investment, employing the policy of high loan interests could discourage potential investors. Nevertheless, Egypt should emulate India in 2007 where Indian government through “the Central Bank called in for debts owed to it by banks, investors, and creditors.” 14The policy reduced the amount of money in circulation by money flowing from investors, banks, and investors to the government. The government can control what it does with the money.
Poverty, unemployment, and low income
Currently, the Egyptian government has employed a policy of providing the poor population with basic needs. The system has proved costly for the government as well as ineffective. Since low income and unemployment are the leading contributing factors to poverty in Egypt, the country needs to adopt policies that curb the two factors. First, the Egyptian government needs to focus on its fiscal policy by reducing interest rates on loans. Private investors can access the loans. The private sector provides most jobs for developing countries, for instance in Bangladesh non-farm self-employment provide “almost half of the employment in the country.”15
Additionally, the Egyptian government needs to provide subsidies or lower taxes to businesses that employ the long-term unemployed individuals. For instance, United Kingdom has reduced its high unemployment levels by introducing “UK Youth Contracts where companies receive 2,275 Euros for hiring young people.”16The government needs to introduce national minimum wages too since one can be employed but paid poorly. Employment and fair income would reduce poverty in Egypt.
Social policies
Overpopulation
Family planning is a sustainable solution for population growth. In countries like China where one-child policies have been effective, “population has reduced by almost 30%.”17 Egypt too has to enact birth control policies where a family is restricted to a certain number of children. Through the policy, population growth will decrease.
Slums and poor housing
Enacting policies on poverty, unemployment, and overpopulation, as already discussed in the report, can help to reduce development of new slums. To abolish the existing slums, the Egyptian government needs to invite private investors in the housing sector. The government needs to focus on affordable houses in two ways. First, it has to establish policies that allow access of private investors to loans. For example, in 2001, the Chile government reduced loan interest rates to private investors who were venturing into housing sector.18This improved housing conditions in the country. Secondly, the Egyptian government needs to reduce prices on urban land to enable private investors to afford the land. For instance, when Chilean government reduced the prices of land, the houses become more affordable and more investors were willing to venture into the business.19
Political policies
The Egyptian government should separate the two arms of government; the judiciary and executive. Definition of clear roles of the two parts of government will enable judiciary to examine the scarcities facing it. For instance, the judicial system in Egypt does understand it has fewer judges as compared to the number of pending and new cases. It is easier to carry out judicial reforms if the judiciary is given full control of the judicial system.
In conclusion, Egypt faces numerous and interrelated economic, social, and political challenges. Economic problems include large public debt due to fiscal deficit, high inflation, high poverty levels and increased rate of unemployment. Overpopulation, large number of slums and strained health sector are the major social strains in Egypt. In addition, political challenges include political violence, corruption and ineffective judicial system. The Egyptian government needs to adopt policies that have been proven to be effective to tackle the challenges. Successful implementation of the policies will favor growth and development of the country.
Notes
“Egypt in numbers” - BBC News, http://www.bbc.com/news/world-middle-east-27251107 accessed February 21, 2017).
“Egypt”-The Economist. http://country.eiu.com/egypt (accessed February 21, 2017).
“Egypt in numbers”-BBC News
“Egypt”-The Economist
“Egypt”-The Economist
“Egypt in numbers”-BBC News
“Egypt”-The Economist
“Egypt”-The Economist
“Egypt”-The Economist
“Egypt”-The Economist
“Egypt”-The Economist
Khan, Azizur Rahman. "Growth, employment and poverty." An analysis of the vital nexus based on some recent UNDP and ILO/SIDA studies (2005).
Khan, "Growth, employment and poverty."
Basu, Kaushik. "Understanding inflation and controlling it." Economic and Political Weekly 46, no. 41 (2011): 50-64.
Khan, "Growth, employment and poverty."
Khan, "Growth, employment and poverty."
Khan, "Growth, employment and poverty."
Eduardo Rojas . The Long Road to Housing Sector Reform: Lessons from the Chilean Housing Experience. Journal of Housing Studies Volume 16, 2001 - Issue 4. Pages 461-483
Bibliography
Basu, Kaushik. "Understanding inflation and controlling it." Economic and Political Weekly 46, no. 41 (2011): 50-64.
Eduardo Rojas . The Long Road to Housing Sector Reform: Lessons from the Chilean Housing Experience. Journal of Housing Studies Volume 16, (2001): 461-483
Egypt in numbers - BBC News, http://www.bbc.com/news/world-middle-east-27251107 (accessed February 21, 2017).
Egypt-The Economist. http://country.eiu.com/egypt. (Accessed February 21, 2017)
Khan, Azizur Rahman. "Growth, employment and poverty." An analysis of the vital nexus based on some recent UNDP and ILO/SIDA studies (2005).
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