Austerity measures won't save Egyptian economy

Just over a month after the implementation of the new state budget, the economic crisis is still lingering in Egypt — despite the Egyptian government’s adoption of strict austerity measures such as the unexpected raising of fuel prices, which was reflected in food prices and public transportation fees. This has challenged the government's position in the eyes of a population that ousted the Muslim Brotherhood over accusations that it was leading Egypt into bankruptcy.

The Egyptian government announced austerity measures as part of the general budget on July 5, aiming to reduce the deficit by 10%, equivalent to 50 billion Egyptian pounds (EGP), or $6.9 billion. This was done by partially lifting fuel and electricity subsidies, and adopting progressive taxes and broadening the tax base.

These austerity measures emerged after the Ministry of Finance’s indexes pointed toward a collapse in the economy: Inflation reached 10%, the growth rate decreased by 2% and unemployment among youth skyrocketed to 25%. Meanwhile, the public treasury was burdened with salaries and subsidies.

According to governmental statistics, “Without any reform, the total deficit would reach 243 billion EGPs ($34 billion), or around 12% of gross domestic product (GDP). Therefore, the governmental debt will be of 1.9 trillion EGP, or $265 billion, equivalent to roughly 93.6% of the GDP.”