Egypt’s new Islamist president and his old military foes have come out swinging in a struggle for political power, but their countrymen need them to find a way to work together to avert economic chaos.
In the two weeks since his inauguration, Egyptian President Mohamed Mursi of the Muslim Brotherhood has openly defied the military by summoning the Islamist-led parliament the generals dismissed on the eve of his election.
The political confrontation risks paralyzing the government and the first casualty could be Egypt’s fragile economy, fast heading toward a balance of payments and budget crisis.
The past year and a half of turmoil has frightened away tourists, sent investors packing and wrecked economic growth. Egyptians need their leaders to set aside their political quarrel fast.
“Both the military and the Brotherhood are here to stay for the foreseeable future and neither side is strong enough to defeat the other, so there has to be some compromise,” Shadi Hamid of the Brookings Doha Center said.
The army, in power for six decades, moved to limit the power of the new civilian president even as voters were lining up to elect him. On the first day of a two-day run-off election last month, generals dissolved the parliament. On the second day, they issued a decree restricting the president’s powers.
Mursi did not wait long to assert his own power either, issuing a decree summoning the disbanded parliament just days after he took office. The lawmakers met on Tuesday last week. Judges, seen as allies of the generals, responded by rebuking Mursi.
An economy in such straits will not long survive such confrontation, economist Said Hirsh of Capital Economics said.
“Months, rather than years, they can hold on like this,” he added.
Mursi, whose Brotherhood was repressed under the rule of military men, wants to whittle away at the might of the Supreme Council of the Armed Forces (SCAF) and the sweeping economic interests they control.
However, he must also address the demands of an electorate desperate for jobs and security after exhausting uncertainty since former Egyptian leader Hosni Mubarak was toppled by street power in February last year.
“Confronting SCAF and improving the economy don’t always go together. Sometimes you have to make a choice to prioritize one over the other,” Hamid said.
The political crisis may have already cost Mursi valuable time to set the economy straight and the tasks ahead are huge.
Egypt’s foreign reserves have tumbled to US$15.5 billion, well below half the level they were at when the anti-Mubarak uprising erupted in January last year. Interest rates the government pays have rocketed to an unsustainable 16 percent for one-year treasury bills, their highest in a decade.
Investors will be watching closely as Mursi sets up a new government. Several names for a new prime minister are being bounced around — mostly technocrats with an economic background.
“The formation of a legitimate government — and evidence that that government is capable of making and implementing policy — is essential if investors who believe in Egypt’s long term prospects are to be persuaded that they can begin to deploy capital now,” said Simon Williams, an HSBC economist in Dubai.
Mursi must convince the IMF that he has enough control of government and broad political support to implement austerity measures the IMF is expected to demand to open the way for a loan facility, last put at US$3.2 billion.