Egypt hopes el-Sisi can reignite economy


Egypt's two day election started at 0600 GMT on May 26 following more than three years of political upheaval that has seen the overthrow of two presidents overthrown, civil unrest in which thousand have lost their lives, a spate of terrorist attacks and, as a result, an economy in tatters.

Sisi has positioned himself as a strong leader who can restore stability to Egypt and turn the economy around. He is expected to win effortlessly over his only opponent, Hamdeen Sabbahi, who is fighting on an anti-corruption platform. The armed forces and police are guarding polling stations across the country, which has seen a surge in deadly attacks after Mohamed Morsi's overthrow last July. Sisi on the other hand has vowed to eradicate the Muslim Brotherhood and put an end to terrorism.

High on the agenda will be energy subsidies. Sisi has hinted that he favours cutting subsidies, a move seen as essential if fiscal stability is to be restored, however cuts would be an unpopular move, potentially sparking off further public unrest which is the last thing he needs. Nevertheless business leaders have reportedly made it known they regard the subsidies on fuel and electricity as something that will have to be pruned back if public finances are not to collapse.

On the one hand maintaining the subsidies could scupper the economy; on the other reducing them is sure to enrage the millions of Egyptians living in poverty three years after the revolution was supposed to bring in a new and fairer society. Keeping energy prices low could sink the economy. Both Sadat and Mubarak were both forced to maintain subsidies on basic commodities in order to maintain peace on the streets.

The industrial and business community in Egypt believes that more damage is done to the economy by subsidies than justified by the advantages of cheap energy: reliability of supply is more important. What is really required is investment in energy infrastructure. Subsidies have boosted demand beyond the country's capacity to supply it and meeting that demand has affected Egypt's ability to export energy for much needed foreign currency. The government is also in debt to energy majors to the tune of nearly $6 billion, much of it to British firms BG and BP.

For Egypt to rein in its energy use, prices would have to rise, however, and foreign investors will hesitate to support power generation infrastructure until prices are high enough to give them a realistic return.