Egypt’s al-Sisi pledges economic reform, but…

In this article, military strongman and presidential candidate Abdel Fattah al-Sisi talks of grandiose and cumbersome projects, compulsory contributions for welfare, low-cost products…but the only guy who talks about the real problem–subsidies–is an economics professor, and even he gets it only half right. His populist idea of cutting fuel subsidies to industry doesn’t work by itself, because every product has an energy factor, and if you raise the price of fuel, you raise the price of the product…

Subsidies mean gasoline costs $1.75 a gallon, bread costs a quarter for a loaf, and relatively well paid foreigners like me can live well in Cairo for just $350 a month plus rent. That’s the extent of the distortions caused by the subsidies. Eliminating them would cause immediate 30 percent inflation, so that’s not the answer, either–but subsidies must be replaced by welfare, however it’s done. There’s more on this in Chapter 2 of “Broken Spring.”

Al-Sisi is all but assured of winning the election for president, but he has so far given no indication of grasping the depth of Egypt’s economic crisis. Of course, no candidate, even the military’s candidate, would advocate a policy that would cause widespread upheavals just before an election, so let’s give him the benefit of the doubt, wait and see…

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