United States aid for Egypt and its economic challenge Essay

Submitted By BostonFrenchie
Words: 1028
Pages: 5

For several years now, political transformations have occurred all around the world. In a large number of countries, the working and middle classes have dramatically increased due to the economic advances that have been experienced. This has lead to several democratic revolutions and especially across the Middle East. What is called “the "Arab democratic revolution" is today considered as an example for any resistance in the Muslim world to archaic dictatorships. Egypt and its youth protestants succeeded to overthrow the regime of Hosni Mubarak but the country still suffers from poor economic growth and its political risk still increase. In response, the International Monetary Fund (IMF) has agreed to help Egypt but the country will have to implement some political changes, which have implications for both Egypt economic climate and foreign businesses thinking about investing in Egypt.

Egypt governance was considered as poor and weak for the last five years with the association between the Business elite and the National Democratic Party. Personal benefits of the Business elite were amplified with the profiteering of economic and reforms policies. Various social and economical challenges were experienced as a result of this disadvantage (London School of Economics and Political Science 2012). Young people faced a high unemployment, a poor education was given, less than a half of the female population was illiterate and poverty retained a predominant place. With the spread of the revolution in Tunisia, other Arab countries and Egypt began to follow the march for freedom and independence (Shehata 2012). On January 25th 2011, the revolution in Egypt started and 18 days later, the Egyptians succeeded to overturn the regime. With the support of the Supreme Council of the Egyptian Armed Forces (SCAF), the dictator Hosni Mubarak was forced to resign and Egypt undergone is most important political transformation (United States Congressional Research 2011). The temporary control of the country taken by the SCAF manages to transform the government in a democracy in demand to the youth protest movement.

Dramatic transformations have been witnessed in the Egyptian political climate since the revolution with the creation of more than 6 Islamic political parties, of which the most important is the Freedom and Justice Party (FJP) (Shehata 2012). By possessing the majority in the Egyptian parliament, FDJ was considered as the largest party in Egypt. This Islamic party decided to support a market-oriented economic system in order to fight the poor economic growth and the raise of unemployment that faces Egypt sine the revolution. Resources and energetic activities will be privately owned thanks to this market economy. (Peng 2013, p. 27).
With the goal to develop a better economic performance, FDJ highlights a better use of Islamic values and Islamic finance instruments. By focusing on an effective economic vision, FDJ achieved to win at the presidential election and the second republic was born.

Economic growth in the country remained, however, slow and unsatisfactory after the presidential election. The political transition that has been endured, reduce the strength of the Egyptian government (Cook & Sabbagh 2009). The difficulties to manage foreign policy challenges stay predominant, thus increasing the political instability in the country. Consequently, economy stills deteriorate as the political crisis continues to rage. Foreign direct investments (FDI) remain low as well as tourism, which decrease the value of the Egyptian Pound. Due to the unstable political climate in the country, economic development decrease as a result of the deep connection that economic growth and political stability share (Alesina & al 1996). Shortfalls of FDI and the systematic capital outflow have been seen, as the political instability is still present in the country. Egypt is not longer a sustainable destination for investment, which deteriorate…