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Robert Walker


The Egyptian Riddle

Posted: 07/02/2013 5:40 pm

Egypt Crisis

Whatever happens in Egypt over the next few days, Egypt will remain a riddle with no plausible solution. If Egypt is politically salvageable, and there is good reason to believe it is not, its economic salvation will still take years, if not decades. Demographically speaking, its fate may already be sealed. For underneath all the political maneuverings, there is a seemingly insolvable problem: Egypt cannot feed itself and Egypt's population is steadily growing.

Two thousand years ago, Egypt was the breadbasket of the Roman Empire. Today, it is a basket case. It imports nearly half of its food, including about 60 percent of its wheat, the country's primary staple. A quarter of its people is living in severe poverty and another twenty percent is living just above the official poverty line. Much of its population is supported by uneconomical food and fuel subsidies that must be abolished or severely retrenched if it is to receive external assistance from the International Monetary Fund. Cutting back those subsidies, however, is politically unthinkable for now and the foreseeable future. That's why Morsi's government, despite a year of intense negotiations, has been unable to reach an agreement with the IMF.

There is, in short, no obvious way out. Not all riddles have answers.

Yes, somewhere down the line a new, more politically popular government may emerge, but the underlying political calculus is not going to change. Any government that does what's needed to right the economy will not be around for long. The people want their subsidized bread and the farmers want their subsidized fuel. Take those subsidies away and you take away the consent of the governed.

All this does not mean that Egypt will drown in chaos tomorrow, but unless it can collect from some source the estimated $20 billion it now needs to keep its head above water, it's just a matter of time. Qatar and Libya have been extending emergency credit to the Morsi government, but that line of credit is not unlimited, and any U.S. assistance would fall far short of what is needed.

Time is not on Egypt's side, and nor is demography. Egypt's population, currently 82 million, is projected to increase to 97 million by 2025 and 122 million by 2050. Unless it can boost domestic food production, Egypt may need to import nearly twice as much food by 2050 as it does today. Arable land in Egypt, however, is in short supply and getting shorter because of urbanization and the rising sea level that is contributing to the salinization of farm lands in the Nile River delta.

Egyptian farmers might be capable of producing higher yields, but Egypt's principal water supply, the Nile, may be constricted by Ethiopia, which is building a major dam upstream, the biggest hydroelectric dam in all of Africa. Despite a regional Comprehensive Framework Agreement on sharing the waters of the Nile, Egyptian authorities are concerned that the dam could be used to reduce Egypt's water supply. In fact, rumors are spreading that Egypt might be prepared to invade Ethiopia or bomb the dam.

Scientific assessments are far from conclusive, but climate-induced drought might also reduce the future flow of the Nile, and rising temperatures in the region could increase the rate at which the waters of the Nile evaporate. Unless some massive underground aquifer is discovered and exploited soon, water scarcity may prove to be Egypt's ultimate downfall.

And it is not just water that's a potential constraint. Egyptian farmers are also highly dependent on fuel and fuel subsidies to run their farm equipment and to transport their crops to urban centers. If fuel prices rise because subsidies are reduced or world oil prices increase, Egyptian farmers may find themselves unable to maintain even current production levels.

If Egypt gets to a point where it can no longer pay its food import bills, it will be a humanitarian disaster of global dimensions and a major setback for the once bright promise of the global economy. There was a time, not that long ago, when observers talked optimistically of Egypt joining the ranks of the emerging economies. Some pointed confidently to Egypt's large pool of unemployed youth as a potential source of economic growth. Six months ago, Thomas Friedman, the New York Times' columnist, publicly pondered whether Egypt might be "the next India." Egypt's current manufacturing base, however, is small and its potential workforce suffers from a high rate of illiteracy. Not much promise there.

Unless Egypt's tourism is revived soon, it's very difficult to imagine where Egypt will come up with the hard currency needed to pay its import bills. Until then, Egypt will remain a riddle... without an answer.