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Egyptians looking for new money source

Posted By F. Michael Maloof On 01/14/2013 @ 9:12 pm In Front Page,Politics,World | No Comments

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WASHINGTON – Egypt’s economy is in dire straits, with foreign reserves dwindling and the Egyptian pound dropping in value, according to report from Joseph Farah’s G2 Bulletin.

In addition, serious fuel shortages are compounded by increasing credit problems that hinder payments for oil and transport companies. Egypt also is experiencing capital flight, affecting the amount of money available to pay its bills and invest.

Sources say that unless Egypt is able to address these problems this year, the economy certainly will collapse in 2014, resulting in domestic turmoil and the prospect of more radical Islamist elements, particularly the Sunni Salafists, taking over the country.

For now, however, Saudi Arabia and Qatar have extended critical loans to the government to survive this year, as have the United States and the European Union.

However, the foreign contributions are not endless. The U.S. and the EU are encountering their own fiscal problems.

So Egyptian leaders are reaching out to radical Iran for help.

So far, Egypt has continued to receive Western assistance, since newly elected Muslim Brotherhood-backed Egyptian President Mohamed Morsi has agreed to maintain the 1979 peace treaty with Israel. The treaty, with Western backing, has been the basis for relative security for Israel.

In addition, Qatar has extended a $2 billion loan to Egypt’s central bank. Qatar and Saudi Arabia also are expected to provide fuel to meet the country’s energy needs.

Morsi sought to confront the country’s political and economic crisis by initially giving himself special powers. However, the backlash was immediate, prompting him to rescind the decrees.

Sources say that without the reforms, Egypt cannot get the $4 billion loan it was expecting from the International Monetary Fund, which is delaying the cash while it awaits reforms. In addition, congressional pressure in the U.S. has halted a promised $1.6 billion U.S. loan because of the uncertainty of the direction the Muslim Brotherhood-directed government. These developments have contributed to devaluation of the Egyptian pound and capital flight.

For Egypt, time is running short.

It will have only this year to receive the needed outside help and make the necessary reforms. If the crisis lasts until the end of the year, or if it gets worse, sources say that the chance of a collapse of the Egyptian economy will be greater next year, since any outside lending likely will evaporate.

This could pose a serious geostrategic problem for Egypt, which is the largest Arab country in the Middle East and is essential for some stability among the Gulf Arab states.

In recent weeks, however, Morsi has been meeting with Shiite Iran – Sunni Saudi Arabia’s nemesis – about assistance for its economic problems. Here, politics will also matter, even though the Sunni Muslim Brotherhood is backed by Iran and is increasing its political, economic and intelligence ties with Tehran.

Morsi’s initiative with Iran comes despite Tehran’s continued backing of the Shiite Alawite regime of embattled Syrian President Bashar al-Assad. Morsi has called for Assad’s exit as Syria undergoes a civil war in what has boiled down to a Sunni uprising.

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