THE BLOG

Egypt Heads Toward the Cliff

When we look at the Arab world through a political lens we focus on the political maneuverings of the moment and lose sight of the epic forces that are shaping the future of the Middle East. That is particularly true with respect to Egypt, where the growing political unrest is the story of the day. The great dilemma facing Egypt today is not whether the Morsi government or democratic rule can long survive; it is whether Egypt itself can long survive.

Economic and demographic forces are driving Egypt towards a cliff and, if it goes over, it will become a failing state with no viable means of economic recovery except a massive bailout. With political cohesion and sufficient time and resources, Egypt could muddle through perhaps, but the political situation continues to unravel, and time and resources are quickly running out. Despite an emergency infusion from Qatar, Egypt's cash is running short. Two years ago Egypt had $36 billion in foreign currency reserve. Today it has less than $14 billion, enough for about three months of imports, and the bond ratings of the banks and the government have been reduced to junk status, making it even harder for Egypt to pay its import bills.

Two thousand years ago Egypt was the breadbasket of the world. The Roman Empire depended heavily on grain imports from the Nile River Valley to feed its population. Today, Egypt is more basket case than breadbasket. It imports 40 percent of its food and approximately 60 percent of its wheat, and is quickly running out of the foreign exchange needed to purchase its food requirements. While the government insists that it has sufficient grain reserves to feed the country until June, rising food prices are already causing significant economic hardship.

Without a much anticipated emergency loan of $4.8 billion from the International Monetary Fund, Egypt's financial standing and its food security could deteriorate sooner rather than later. Burdened by excessive debt, the value of the Egyptian pound is plummeting. But if the IMF loan is granted, the conditions attached to it could force the Morsi government to reduce government subsidies. Either way the Egyptian people are likely to face rising costs for food and fuel, and with one-fifth of the population living on less than a $2.00 a day, the inevitable hardships will add to the political unrest.

In the best of times it is difficult for governments to transition from autocratic rule to democracy. In the worst of times, it can be impossible. With severe poverty, high unemployment, a stagnant economy, deep political divisions, a rapidly devaluating currency, and a population projected to increase by 65 percent over the next 40 years, it's hard to plot out a hopeful scenario for Egypt.

While its natural gas production is on the rise, Egypt is now a net importer of oil. Its manufacturing base is narrow and chronic unemployment is high. The government makes bold assertions about eliminating its dependence on wheat imports, but producing more food in Egypt is an uphill battle. Arable land is in extremely short supply and shrinking because of urbanization and creeping salinization caused by the rising waters of the Mediterranean. There is talk of tapping into underground aquifers and making the desert bloom, but that talk has existed for a long time, and Saudi Arabia's effort to do something similar proved remarkably short-lived. Tourism is Egypt's the principal source of hard currency and its primary growth engine, but with economic hard times fueling the political unrest it's hard to imagine that tourism will rebound.

Some of Egypt's woes are self-inflicted, but as Egypt's population grows, as the flow of the Nile deceases, as oil output shrinks, as deserts expand and salinization increases, the challenges will only mount. To meet them, Egypt must do a better job of expanding family planning options for women, keeping girls in school, and creating economic opportunities for women. Otherwise, Egypt's population will reach unsustainable levels, if it has not already done so.

Egypt is not the only country in the region wrestling with a growing population and shrinking resources. The Middle East and North Africa suffer from severe water scarcity, and climate change will make matters worse. The World Bank estimates that water runoff in the region will decline by 20 to 30 percent in many areas by 2050, while demand will continue to surge. A NASA study released this past week indicates that Turkey, Syria, Iraq and Iran are already experiencing rapid loss of fresh water reserves because of droughts and the over-pumping of underground reservoirs. Yemen's capital, Sanaa, could run out of water before the end of the decade.

The "Arab Spring" notwithstanding, much of the Arab world could be headed for a fall.

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