Some eight months after the ouster of its long-serving strongman, Hosni Mubarak, Egypt's revolution remains the most prominent byproduct of the so-called "Arab Spring." But where, exactly, is Cairo headed? While there remains no shortage of optimism about Egypt's future in many quarters, a close look at the economic indicators suggests that the country may not be moving toward post-revolutionary stability at all. In fact, it is rapidly heading in the opposite direction.
Since this spring, in a development largely unnoticed by the outside world, the Egyptian economy has virtually imploded. Between February and June of this year, the country's stock exchange shrank by nearly a quarter, sending shock waves through the region's jittery financial markets. Worried over the Egyptian government's post-revolutionary solvency, the International Monetary Fund proffered some $3 billion in preferential financing to the new government to stabilize the economy. But Cairo chose to reject the offer, believing that Middle Eastern nations would step in and fill the void with the necessary investment and aid.
Unfortunately, they haven't. Despite lofty pledges of assistance, tangible help from the Persian Gulf's wealthy monarchies has been exceedingly slow in coming. (Egypt is still in negotiations with Saudi Arabia and the UAE for a notional $5 billion in loans, while Qatar has delivered on a grant of $500 million, but only in recent days.)
Western assistance, too, is still mostly notional. In his much-publicized Mideast speech back in May, U.S. President Barrack Obama promised Egypt debt forgiveness to the tune of $1 billion, and loan guarantees for the same amount. The G8 followed suit, pledging at its June summit in Deauville, France to provide some $20 billion to aid the pro-democracy transition in Egypt. Despite these promises, however, precious little tangible financial assistance has actually made it to Cairo, at least so far.
Without it, Egypt's economy has entered a death spiral. Foreign investment has withered on the vine, as skittish investors steer clear of Egypt's tanking financial sector. As a result, Egypt's foreign exchange reserves are said to be declining by $1 billion per month. Debt, meanwhile, is mounting; according to informed estimates, the country's ballooning budget deficit will reach nearly nine percent of GDP in the next year. Meanwhile, Egypt's external debt - already some $35 billion - is poised to get significantly bigger, as officials in Cairo desperately try to borrow their way out of their fiscal crisis.
Just how bad is the situation? A telling assessment was recently provided by Ahmed al-Borai, Minister of Manpower and Immigration in the country's transitional government. "Egypt is currently passing through a critical period and on the brink of bankruptcy," the Egyptian daily Al-Masry al-Youm reports al-Borai telling an investment conference in Alexandria in early October. "[Egypt's] losses are growing day by day." The forecast, according to al-Borai, is dire. "Either we band together and change the current situation, or let Egypt be destroyed."
All of which suggests that, at least in the case of Egypt, the "Arab Spring" hasn't netted prosperity at all. Rather, it has produced the kind of economic malaise that predisposes societies to seek relief by embracing authoritarian central control. That, in turn, could be a boon to illiberal elements - including the country's main Islamist movement, the Muslim Brotherhood, which is now organizing to dominate upcoming parliamentary polls to the detriment of its secular rivals.
That outcome isn't necessarily a foregone conclusion, however. New infusions of foreign capital from Western stakeholders, if judiciously disbursed and pegged to real economic and political reforms, could begin to reverse the country's current, ruinous course - or, at least, provide Egypt's government with much-needed breathing room to begin putting its economic house in order. So, too, might a strong American policy that leverages the $1.9 billion in aid to Egypt that Washington still disburses annually to jump-start greater dialogue and coordination among the various political parties now struggling to fashion a concrete national agenda.
Without such engagement and assistance, Cairo's current drift could easily end up confirming the most pessimistic predictions surrounding Egypt's transformation - that, having ousted the Mubarak regime, the country's revolutionaries are destined to wind up with something far worse.