Egypt’s in a pickle

It’s Stratfor again, talking about Egypt. They point out that there are real-resource constraints on the government’s ability to change things:

Egyptian petroleum production peaked in 1996 and the country first became a net importer in 2007. Government fuel subsidies are an enormous burden on state finances and, throughout the past year, failures to pay suppliers and a shortage of foreign exchange available to importers have caused supply shortfalls and price spikes throughout the country.

The second major challenge stems from Egypt’s extreme vulnerability to international food markets.

Bread is a staple of the Egyptian diet, and Egypt relies on imports for more than half of its wheat consumption. Although farmland within Egypt is increasingly dedicated to growing wheat, there is simply not enough arable land for Egypt to feed its population.

I find MMT rather convincing, and I get that a government can always buy everything that’s available in their currency, but the situation for Egypt’s government seems to be that the things that they have to buy to ensure a measure of domestic tranquility are precisely not available in their currency. So while I am always wary of the IMF bearing credits and they seem to push their typical misguided recommendations on how to restructure economies, I really don’t see what other option Egypt has apart from getting the IMF dollar-denominated loan.

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This entry was posted in economic policy, macroeconomics, MMT, Real resources. Bookmark the permalink.

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