international analysis and commentary

Defining the priorities of Egypt’s new president

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Egypt has voted for change. An important component of Mohamed Morsi’s victory is the strong aspiration of the people not to reproduce a new version of the old regime. In parallel, an important component of why he won by such a small margin is the fear voters have of giving their trust to an Islamist candidate who could possibly change the secular identity of the country. And so, the result of the recent Egyptian presidential elections reflects the dichotomy in today’s Egypt at large. On one hand there is an increasing demand for change, and on the other there is fear of the ambiguous results that change may lead to. In this respect, Morsi’s presidency is pivotal in realigning Egypt with the aspirations of the revolution and setting it on a course that can guarantee positive and sizeable reform. There are three main challenges that will face Morsi in this process.

First, the country’s unstable political situation has had dire short run effects on the economy and it is up to the new president to curtail these repercussions. Between May 2011 and April 2012, the country has witnessed 1,398 labor strikes in both government and private sectors, including those by teachers, doctors, public transportation workers, post offices workers and public taxation authorities. People are taking to the streets demanding improved living standards in what can be described as a new revolution on a micro level.

Social instability is compounded by political developments that increase uncertainty regarding the future of the country such as the recent dismissal of the People’s Assembly by the Supreme Council of Armed Forces, the evolving relationship between the Islamist camp and the military and the outcome of the constitution drafting process.

As a result, the Egyptian economy has taken a strong blow. The interest rate of the country’s most recent sovereign bond issuance was the highest in 15 years – which reflects Egypt’s declining credit rating, in a downward trend every month since the onset of the revolution. The inflation rate is estimated to be at 9.5% for the remainder of 2012 and is expected to increase to 12.1% in 2013. In addition, four million graduates find themselves jobless in a country where youth unemployment hovers at around 25%.

While the uncertainty created by these trends may eventually prove favorable in the struggle for development that Egypt is undergoing, it is up to the new president to soften the landing of the Egyptian economy and mitigate the effects that political uncertainty can have on the economic situation. Recently, the Egyptian stock market witnessed its strongest gains since the beginning of the revolution after Morsi’s first presidential speech, which demonstrates the ability of the new president to appease investors and restore confidence to the economy.

Second, due to the unwarranted and overly ambitious promises made by most presidential candidates in the run up to the elections, the new president has to manage the public’s expectation of quick change. Morsi himself promised a renaissance in Egypt, a rebirth of the country’s political and economic situation that would guarantee dignified living standards for all citizens. Judging from the current state of the economy, the rampant levels of corruption and the political deadlock that may result from competing forces in the new Egyptian political scene, such a renaissance seems more like wishful thinking.

On this backdrop, the new president will have to extend his hand towards other parties in the country and manage a national reconciliation process that can solidify Egypt’s new political priorities through dialogue and consultation. Consensus building will be a critical instrument in moving forward with reform and Morsi will have to move beyond the interests of his political coalition and towards the long-term national interest of Egypt in all its constituencies.

His task is really to build of a new state and his every move will be assessed from the viewpoint of whether it is intended to empower the state as an institution or just advance the mandate of a political faction or party. There has been talk recently of the potential appointment of a Coptic woman as vice president and a technocrat such as Mohamad ElBaradei as prime minister. It is moves such as these that can lead to consensus building, political consolidation and restored trust in the state.

Third, the new president is charged with redefining Egypt’s relationship with the international community. It is important to redefine the foreign policy objectives of the country so that they are better aligned with its developmental priorities. A key aspect of Egyptian foreign policy today is its stance regarding international donors. Central Bank foreign reserves have declined by $1.4 billion every month since the onset of the revolution, placing great pressure on the funding requirements of the economy. In such a situation, loans in foreign currency from abroad can be considered as the most short-cut method to address the problem: in this respect, establishing political consensus regarding the conditionality of official development assistance is pivotal.

There is no doubt that Egypt will need to resort to international financial institutions in the future to support its developmental trajectory. However, such assistance is viewed with a high degree of suspicion in the country to the extent that some believe that the international community conspires against the revolution through development loans. In as much as there is an element of foreign political interest in multilateral development projects, such a knee-jerk reaction at the domestic level is not warranted and out of proportion.

Clearly, the antagonistic view of Egyptian public opinion regarding foreign assistance is linked to the foreign policy paradigm upheld by the Mubarak regime. Thus, the new president will need to overcome domestic resistance without losing political support for his foreign policy.

Judging from the political and economic challenges that lie ahead, the priorities of Mohamed Morsi’s presidency are relatively straightforward. Protecting the Egyptian economy from the negative repercussions of political turmoil, building consensus in order to move forward with political and economic reform and improving the relationship with foreign counterparts to better reflect the developmental requirements of Egypt are the three main objectives that should be pursued. Ultimately, given the level of complexity of each of these issues, it is quite clear that Egypt is in for a bumpy ride.