It’s looking very much like Egypt is going bankrupt, and given about six months more will be unable to buy in any food (they recently import about half, too many people, not enough food). This will lead to 83 million Egyptians being chronically short of food, and I’d expect a mass emigration from the area by early winter if no-one sends them food aid (the Americans and others are proposing huge amounts of aid to prevent this population movement). While I’m not keen on handing over resources to fundamentalists who despise us, it’s better than having them trying to force their way North and starting WWIII in the process. Or trying to force their way south into the greener Sahel of Africa. Looking at it rationally, feeding them will be less expensive than a huge war or dealing with mass illegal immigration, and they might finally get the idea that they need to use birth control and improve their farming methods. And on an unpleasant (but valid) note; if they realise how dependant they are on us for their survival, they may tone done their aggression. It’s possible it would give us enough leverage to impose human rights/democracy etc in the country. On the upside, being that broke means that they could’t fund any kind of major war against Israel, which means all the current Muslim Brotherhood rhetoric will remain just that.
The hunger to come in Egypt
Egypt is running out of food, and, more gradually, running out of money with which to buy it. The most populous country in the Arab world shows all the symptoms of national bankruptcy – the kind that produced hyperinflation in several Latin American countries during the 1970s and 1980s – with a deadly difference: Egypt imports half its wheat, and the collapse of its external credit means starvation.
The civil violence we have seen over the past few days foreshadows far worse to come.
The Arab uprisings began against a background of food insecurity, as rising demand from Asia priced the Arab poor out of the grain market (Food and failed Arab states, Asia Times Online February 2, 2011). The chaotic political response, though, threatens to disrupt food supplies in the relative near term. Street violence will become the norm rather than the exception in Egyptian politics. All the discussion about Egypt’s future political model and its prospective relations with Israel will be overshadowed by the country’s inability to feed itself.
Egypt’s political problems – violence against Coptic Christians, the resurgence of Islamism, and saber-rattling at Israel, for example – are not symptoms of economic failure. They have a life of their own. But even Islamists have to eat, and whatever political scenarios that the radical wing of Egyptian politic might envision will be aborted by hunger.
The Ministry of Solidarity and Social Justice is already forming “revolutionary committees” to mete out street justice to bakeries, propane dealers and street vendors who “charge more than the price prescribed by law”, the Federation of Egyptian Radio and Television reported on May 3.
According to the ministry, “Thugs are in control of bread and butane prices” and “people’s committees” are required to stop them. Posters on Egyptian news sites report sharp increases in bread prices, far in excess of the 11.5% inflation reported for April by the country’s central bank. And increases in the price of bottled propane have made the cost of the most widely used cooking fuel prohibitive.
The collapse of Egypt’s credit standing, meanwhile, has shut down trade financing for food imports, according to the chairman of the country’s Food Industry Holding Company, Dr Ahmed al-Rakaibi, chairman of the Holding Company for Food Industries. Rakaibi warned of “an acute shortage in the production of food commodities manufactured locally, as well as a decline in imports of many goods, especially poultry, meats and oils”. According to the country’s statistics agency, only a month’s supply of rice is on hand, and four months’ supply of wheat.
The country’s foreign exchange reserves have fallen by US$13 billion, or roughly a third during the first three months of the year, Reuters reported on May 5. The country lost $6 billion of official and $7 billion of unofficial reserves, and had only $24.5 billion on hand at the end of April. Capital flight probably explains most of the rapid decline. Egypt’s currency has declined by only about 6% since January, despite substantial capital flight, due to market intervention by the central bank, but the rapid drawdown of reserves is unsustainable.
At this rate Egypt will be broke by September.
Egypt imported $55 billion worth of goods in 2009, but exported only $29 billion of goods. With the jump in food and energy prices, the same volume of imports would cost considerably more. Egypt closed the 2009 trade gap with about $15 billion in tourist revenues, and about $8 billion of remittances from Egyptian workers abroad. But tourism today is running at a fraction of last year’s levels, and remittances are down by around half due to expulsion of Egyptian workers from Libya. Even without capital flight, Egypt is short perhaps $25 billion a year.
The full article is worth a read (link in title). Essentially if we don’t intervene financially, there will be millions of deaths among the poorer Egyptians, as well as a wave of humanity trying to escape Egypt. I’m predicting that the current wave of violence against the Copts (which is kept curiously quiet by the BBC) could escalate into full-blown genocide very quickly, as starving people get very aggressive and will try to get rid of any minority group to reduce competition for food. This is one of the few cases where I’m going to suggest a blanket granting of asylum to a large number of people (Copts), fairly shared between the developed nations. It will reduce the Egyptian population by about 10%. It will take a some stress off their limited food supplies, and prevent the horrific annihilation of millions.