Egypt's Economic Health Needs Outside Help

Transcript

RENEE MONTAGNE, HOST:

Egypt's political future will largely depend on its economy, and its economic future will largely depend on help from other countries. To talk more about this, we reached Mohsin Khan. He's a senior fellow at the Rafik Hariri Center on the Middle East at the Atlantic Council. He's also the former Director of the Middle East Department at the International Monetary Fund. Good morning.

MOHSIN KHAN: Good morning.

MONTAGNE: What are Egypt's most immediate economic needs?

KHAN: Well, the most immediate economic needs is to somehow generate financial stability, to fix the public finances, because they have a wide and large and growing budget deficit. And of course they have serious external imbalances in the sense that their balance of payments is in deficit and they're running low on reserves. So they need external financing very badly and very urgently, just to stabilize the economy.

MONTAGNE: Well, Egypt's neighbors are also concerned. They've been playing an important role in keeping the country afloat economically. Is it Egypt's stability that's the main concern or do the neighbors have other economic interests, here, at stake?

KHAN: I think it's mainly stability, Renee. It's in nobody's interest to have an Egypt that collapses. So I think the hope was that they would be negotiating and IMF program and getting an economic plan. That doesn't seem to be happening just yet. And consequently, they have just been putting in money to be happening just yet. And consequently, they have just been putting in money to sort of keep Egypt from collapsing, and that includes Libya, even Iraq, certainly the Gulf countries.

For example, we know that the United Arab Emirates has just given an Egypt $3 billion. All that money is essentially there are to keep the economy afloat.

MONTAGNE: Several American politicians are threatening to cut off U.S. aid to Egypt. At $1.5 billion, and most of it military aid, how does U.S. aid compare with what countries in the region are providing?

KHAN: Well, in terms of just the dollar amount it's not that big a deal. Egypt, over the course of the next year, needs something like $20 billion, Renee. And we're talking about 1.5 billion from the U.S. So it's not really a big deal from the point of view of the economy.

It is a big deal from the point of view of regional interest that the United States has there, and keeping the military happy in some way. But basically this money that the United States has provided, in terms of aid, has gone to buy hardware and sophisticated weapons mostly, and almost exclusively, from the United States.

Suppose its cut off, if the military still wants to buy weapons and so on, then it'll have to use Egypt's own resources. So we're going to say - when I said the country needs $20 billion - well, the country will need 21.5 billion. You know, who's going to get hurt by this? Not the Egyptian people if the aid is cut off, but largely the American contractors and suppliers, because they're going to lose those contracts.

MONTAGNE: There's been a lot of talk about a pending IMF loan of more than $4 billion. Now, you used to work at the IMF. What will it take for the IMF to come through with assistance for Egypt and what will it mean for Egypt?

KHAN: What it will mean for Egypt is not just that it gets the $4.8 billion in the loan from IMF, available interest rate of about one percent, but there's a lot of other money from donors - the European Union, from the World Bank, from the African Development Bank, et cetera - that is conditional on Egypt to having an IMF program.

But secondly, it sends a very important signal to foreign investors in the international community that Egypt has an economic plan to stabilize the economy, to stabilize its finances, and to get the economy moving on a growth path to create jobs, et cetera. And that most importantly, this economic plan has been endorsed by the IMF and the international community.

So foreign investors will start looking at Egypt differently and start putting private money into the country, as well. I suspect that it's going to take time for this to happen. Because the IMF is going to want to know does this program have the support of the major political parties in the country, i.e. not just the government, but the major political parties who might be in opposition as well. I don't see that happening very soon.

MONTAGNE: Well, thank you very much for joining us.

KHAN: My pleasure, thank you very much.

MONTAGNE: Mohsin Khan is a senior fellow at the Rafik Hariri Center for the Middle East at the Atlantic Council.

(SOUNDBITE OF MUSIC)

MONTAGNE: You're listening to MORNING EDITION from NPR News. Transcript provided by NPR, Copyright NPR.