Since January’s ousting of Hosni Mubarak as president, Egypt’s economy has come under enormous strain. Tourism has plummeted, foreign capital has fled and domestic investment has all-but stalled. The International Monetary Fund’s $3bn budget support plan, announced on Monday, came not a moment too soon.
Even so, Egypt’s problems continue to mount. Unemployment is rising: some estimates suggest about 800,000 people have become unemployed in the past three months, while the country’s workforce amounts to only a third of its population. Labour protests across several sectors have also become a source of unease for international investors
The biggest worry, however, is Egypt’s currency. The military caretakers are deploying foreign reserves to try and prop up the Egyptian pound, with the result that reserves have dropped from $34bn to $28bn in three months. If this trend accelerates Egypt is likely to come close to having no hard currency reserves by the end of the year. Market speculation and sales of pound-denominated holdings could then follow, plausibly leading to a currency collapse, and yet more economic and political turmoil.
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