Cairo- Decypha: As Egypt’s struggles to gain control over its turbulent economy, the country’s president Abdel Fattah Al-Sisi has declared a three-month state of emergency in response to a deadly attacks on two Coptic churches on Palm Sunday, prompting stakeholders of the business community and economic experts to question its effect on the country’s economic welfare.
The two consecutive attacks on Mar Girgis Church in Tanta and St. Mark’s Coptic Orthodox Cathedral in Alexandria on the 9th of April 2017 had left at least 40 people killed and more than 80 injured.
Coming back to a state of emergency, which ended in 2012 after 31 years in place under which security forces were given power to detain suspects without investigation, the government wants to restore the political stability in the country that has been suffering from several terror attacks majorly in North Sinai.
The emergency state returned at a time where Egypt wants to restore the investors’ confidence in the Egyptian market, especially after the EGP’s floatation in November, a move that helped in securing a $12 billion loan from the International Monetary Fund (IMF). The same decision, nevertheless, resulted in soaring prices of products as the USD exchange rate stood at an average of EGP18 per $1, pushing the annual inflation to more than 32% in April.
Concerns about investments
On the day of the bombing, the Egyptian Stock Exchange’s main index, EGX-30, declined by 1.55%, with the market capitalization losing a market value of EGP 6.9 billion, according to Egypt’s stock exchange reports.
“The emergency state would have a negative impact on the economic development and FDI levels in case it was extended for more than three months,” political science professor at the American University in Cairo (AUC). Noha Bakr, told Decypha.
In the meantime, the fact that the government still did not issue a new investment law, which is expected to include incentives for investors and offer easier business procedures, was “not going to attract new investments in the next three months anyways,” Bakr told Masr AlArabia in this month.
The emergency state is also expected to challenge declining the USD exchange rate in that period, economy professor at Benha University, Nadia Salem told the same newspaper. “There will be a state of fear and uncertainty from investors, even the local investors will be concerned about expanding their activities,” Salem explained.
These views brought back memories when Egypt’s businesses and transportation industries were suffering in the second half of 2013 due to the curfew imposed under the state of emergency, which were re-introduced as clashed between security forces and supporters of ousted Islamist president Mohamed Morsi reached the peak at that time.
On the other hand, CEO of private equity firm Union Capital, Hany Tawfik, saw a more positive outlook. Tawfik believes that the emergency state will not negatively affect the direct investment funds, “but it might negatively affect the stock market,” he told Al Arabiya news channel.
The emergency state will work on restoring political and economic stability in Egypt, “and it will later help the investors feel secure,” economy professor at the British University in Egypt (BUE) Doha Abdel Aziz told Tahrir News.
Government and parliament are positive about the impact
The Egyptian government is adopting an economic reform programme, which entails reducing public spending on energy, electricity and food subsidies, aiming to reduce the budget deficit. The IMF expected in a recent report that the budget deficit will stand at 10% in 2017/18 fiscal year, but Moody’s were more conservative as it expected a deficit of 11%.
Crippled by doubling the cost of electricity and fuel subsidies cost doubled to nearly EGP135 billion in the current budget, according to the finance ministry, the government is targeting addressing that through luring more FDI, which became a point of concern now under the emergency state.
Egypt’s economic reform programme will not be affected by the state of emergency, Minister of Investment and International Cooperation, Sahar Nasr, said in a 12 April statement.
The parliament is positive about the emergency’s impact as well. Member of the economic committee MP Hesham Omara said it will help the government defeating terror acts before they occur, “it will reassure investors who has concerns,” he told Parlmany.
Echoing the same opinion, MP Mohamed Fouad explained that France also has the emergency state on and it did not have effect on the economic development. “Egypt’s best economic development period was between 2003 and 2009, when the emergency state was effective under Mubarak,” he said.
The Egyptian government will have to prove in the coming months that it addressed its security status under the emergency state, to reassure potential investors who want to benefit from the attractive USD exchange rate, low labour costs and investment incentives planned by the government.
By Doaa Farid
