Saudi Reforms Could Cause a Crisis for Egypt - Bloomberg

Saudi Reforms Could Cause a Crisis for Egypt - Bloomberg:

In August, as the Turkish lira crisis set off anxieties of financial turmoil in other developing economies, the Egyptian pound held firm. That was thanks to painful reforms the government of President Abdel-Fattah El-Sisi began in 2016. Allowing the currency to trade freely, along with a rise in tourism and in remittances from Egyptians working abroad, had helped to stabilize the Egyptian economy, prompting S&P Global Ratings to raise the nation’s credit rating.

Now, Egypt’s reforms face an unexpected challenge from the reform agenda of its most important political and economic allies, Saudi Arabia. The knock-on effect of Crown Prince Mohammed bin Salman’s plan for economic modernization could force El-Sisi to deepen spending cuts and seek more expensive borrowing. The way out for the president is to make bolder changes, to cut the Egyptian economy loose from the restricting ties to the state, and its all-powerful military.

On Sept. 11, the Saudi government began to enforce strict labor-market regulations, to boost employment of its own nationals at the expense of foreign workers. The hiring restrictions, part of Prince Mohammed’s Vision 2030 program, were announced in January, and there has been a steady exodus of foreigners ever since. According to Saudi government statistics, the number of foreigners employed in the kingdom fell from 10,883,335 in the fourth quarter of 2016 to 10,183,104 in the first quarter of 2018.