A drive-through Covid-19 screening center at Ain Shams University in Cairo on June 17.
Photo: Nariman El-Mofty/Associated PressEgypt’s economy is reeling as the coronavirus pandemic keeps tourists away, erodes remittances and undercuts spending by Egyptians whose wages were already depressed due to recent years of government austerity.
The toll has forced the Egyptian government to turn once again to the International Monetary Fund, which is set to decide Friday on the country’s request for a $5.2 billion loan. The IMF approved a separate request from Cairo for a $2.77 billion loan in May.
The IMF has said the new loan, which has already been backed by IMF staff, is needed to support Egypt’s spending on health and social services, support economic reforms, and promote job growth. But Egypt’s fresh borrowing will add to its considerable government debt, which stood at 90% of its economic output at the end of 2019.
The IMF bailout is a sign of a converging economic and social crisis facing Egypt as it reopens its economy despite a continuing rise in coronavirus cases. Egyptian leaders have argued the country cannot afford the economic costs of a total lockdown, and have opted for a strategy the government calls “coexistence with the virus.”
The pandemic has posed a unique challenge for the Middle East’s largest nation, where millions of people work in the informal economy, often living on their day-to-day earnings. The country’s social safety nets are also limited.
Economic grievances in Egypt have played a central role in fueling recent unrest, including the 2011 Arab Spring that ended the dictatorship of President Hosni Mubarak. In 2019, the government arrested thousands to quash protests sparked by concerns about corruption and the military’s dominant hold on the economy.
“The main pressure is going to be on the poor,” said Amr Adly, a political economist at the American University in Cairo and the author of a book on the Egyptian economy. “That’s the issue. Egypt has never had a welfare state.”
In addition to a collapse of foreign tourism and plummeting remittances from Egyptians working abroad, Egypt also faces falling oil and gas prices and declining revenues from the Suez Canal, which are dependent on international trade. As of April, Egyptian banks lost as much as $14 billion in foreign assets as investors fled the country, according to the country’s finance minister.
Restrictions imposed by the government in March to slow the spread of the virus have also come at a cost. Nearly three-quarters of Egyptians reported reduced income since the beginning of the pandemic, according to a survey from the government statistics agency released on June 20.
“The shutdown of the economy was a catastrophe for us,” said Ahmed Hesham, 32, the owner of a small contracting and real-estate business. The crisis caused his business to grind to a halt as clients lacked the funds to buy and refurbish apartments, depriving him of two months’ income and forcing employees to seek work elsewhere. “The cash flow stopped,” he said.
Citing the economic costs, the Egyptian government rejected advice from the country’s medical experts that called for a total lockdown.
The words “stay home" are projected onto one of the pyramids in Giza, Egypt, in April.
Photo: mohamed hossam/ShutterstockEgypt instead imposed some measures to limit the spread of the virus in March, including halting international flights and closing schools, places of worship, gyms and nightclubs. It also imposed a nighttime curfew.
Egypt has reported 61,130 cases of the virus and 2,533 deaths so far, but senior government officials have warned that the true infection rate could be five to 10 times the reported figures since testing has lagged behind other countries.
“Mass testing is not an option for many countries, including ours,” said Egypt’s minister of higher education Khaled Abdel Ghaffar, speaking at a government conference last month.
The pandemic has put the country’s hospitals under intense strain as underequipped medics race to deal with an influx of patients. In May, the Egyptian medical professionals’ union warned the health-care system was on the verge of collapse. The government says it is working to address equipment shortages and other concerns, but has also detained doctors who have spoken out about the problems.
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Despite the current surge in cases, which began in May, Egypt is gradually reopening its economy. International flights are set to resume in July, and the nighttime curfew is ending this week. Hotels and other tourist destinations are also resuming operations, but the continuing health crisis could disrupt the government’s plans for a return to normal, as workers fall ill and the pandemic deters tourists.
“This is not a financial crisis. This is a global public health emergency,” said Mr. Adly, the political economist. “We won’t recover until this corona thing is gone.”
The combined pressures of the pandemic and economic crisis give Egyptian officials few options that address both sets of concerns, analysts say.
“Everybody’s trying to figure out the right balance between the economy, people’s tolerance for lockdown, their capacity to sustain these extraordinary measures, and the public health concerns,” said Timothy Kaldas, a Cairo-based analyst with the Tahrir Institute for Middle East Policy, a think tank in Washington. “Egypt is a country with limited resources, so they’re going to have limited options compared to others.”
Write to Jared Malsin at jared.malsin@wsj.com
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