Cairo’s Crude Crisis

Source: Carnegie Endowment
Author(s): Yasser El-Shimy

Original Link:

Low oil prices are heaping added pressure on Egypt’s currency crisis. While common wisdom holds that the finances of fuel-importing nations, such as Egypt, stand to benefit from declining energy prices, the net impact for Cairo’s economy is surprisingly negative. At least in the short term, this trend is exacerbating what was already a full-fledged foreign currency crisis as a result of significant falls in tourism and industrial exports revenues.

In the long run, Egypt should benefit from cheaper oil by spending less on importing and subsidizing gasoline and gas. Indeed, spending on petroleum and natural gas subsidies has decreased from 73 billion Egyptian pounds ($8.2 billion) in 2014–2015 to 55 billion ($6.2 billion) in 2015–2016. This is at least partially due to plummeting oil prices, which may eventually have a positive impact on inflation and allow Egypt to overcome four years of energy shortages. All in all, this may actually be conducive to future economic growth…

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