Short of Money, Egypt Sees Crisis on Fuel and Food
By DAVID D. KIRKPATRICK
Tara Todras-Whitehill for The New York Times
Egyptians in a gas line on Saturday in the city of Luxor. Fuel shortages are plaguing the nation.
The cash shortage is raising questions about Egypt’s ability to keep
importing wheat that is essential to the food supply, stirring fears of
an economic catastrophe.
Egypt Orders Arrest of Satirist Over Skits on Islam and Morsi
By KAREEM FAHIM and MAYY EL SHEIKH
In the nine months since Mohamed Morsi became president, his government
has been accused of employing the same harsh measures against dissent as
did the previous leaders.
Tara Todras-Whitehill for The New York Times
Egyptians in a gas line on Saturday in the city of Luxor. Fuel shortages are plaguing the nation.
By DAVID D. KIRKPATRICK
Published: March 30, 2013
QALYUBEYA, Egypt — A fuel shortage has helped send food prices
soaring. Electricity is blacking out even before the summer. And
gas-line gunfights have killed at least five people and wounded dozens
over the past two weeks.
Tara Todras-Whitehill for The New York Times
A farmer in his field outside Cairo. Farmers already
lack fuel for the pumps that irrigate their fields, and they say they
fear they will not have enough for the tractors.
Tara Todras-Whitehill for The New York Times
On the outskirts of Cairo, men worked to make fixes to an irrigation pump on a farm.
The root of the crisis, economists say, is that Egypt is running out of
the hard currency it needs for fuel imports. The shortage is raising
questions about Egypt’s ability to keep importing wheat that is
essential to subsidized bread supplies, stirring fears of an economic
catastrophe at a time when the government is already struggling to quell
violent protests by its political rivals.
Farmers already lack fuel for the pumps that irrigate their fields, and
they say they fear they will not have enough for the tractors to reap
their wheat next month before it rots in the fields.
United States officials warn of disaster unless Egypt soon carries out a package of tax increases and subsidy cuts tied to a $4.8 billion loan
from the International Monetary Fund. That would persuade other lenders
that Egypt was creditworthy enough to obtain billions more in
additional loans needed to meet its yawning deficit. But fearful of a
public reaction at a time when the streets are already near boiling, the
government of President Mohamed Morsi has so far resisted an I.M.F.
deal, insisting that Egypt can wait.
Those who say Egypt cannot afford enough fuel are “trying to make
problems for Dr. Morsi and his party,” said Naser el-Farash, the
spokesman for the Ministry of Supply and Internal Trade and a fellow
member of the Muslim Brotherhood’s political arm.
Mr. Farash placed blame for the shortage of fuel on corruption left over
from the government of Hosni Mubarak, combined with hoarding inspired
by fear-mongering in the private news media. “They are against the
revolution,” he said.
Independent analysts say that the growing shortage of fuel and the fear
about wheat imports now pose the gravest threats to Egypt’s fragile
stability. “It has the potential to make things very, very bad,” said
Yasser el-Shimy, an analyst for the International Crisis Group.
Egypt has held two years of unsuccessful talks with the I.M.F., and the
current government is still balking at the politically painful package
of overhauls — even as rising prices and unemployment make those
measures more difficult with each passing day.
“They are operating on the notion that Egypt is too big to be allowed to
fail, that the U.S. and the West will step in,” Mr. Shimy said. “They
think Egypt has a right to get the loan, and I think they will probably
keep pushing all the way.”
Officials of the Morsi government have indicated that they prefer to
wait until the election of a new Parliament, which might demonstrate
broader public agreement on the need for changes. But a court decision
striking down the election law has postponed the vote until at least the fall, and many economists say Egypt cannot endure the delay.
“The situation is pretty urgent, because the deterioration accelerates,”
a Western diplomat said, speaking on the condition of anonymity under
diplomatic protocols. Shortages, the diplomat said, are already leading
to layoffs.
Energy subsidies make up as much as 30 percent of Egypt’s government
spending, said Ragui Assaad, of the Economic Research Forum here. The
country imports much of its fuel, and for the first time last year it
was forced to import some of the natural gas used to generate
electricity — the reason for the recent blackouts. Egypt also imports
about 75 percent of its wheat, mixing the superior foreign wheat with
lower-quality domestic supplies to improve its subsidized bread.
But the two years of mayhem in the streets since the ouster of Mr.
Mubarak have decimated tourism and foreign investment, crippling the
economy. The government’s reserve of hard currency has fallen to about
$13 billion from $36 billion two years ago.
About half of its currency reserves are in illiquid forms like gold,
economists say, while billions more are owed to the foreign companies
that operate Egypt’s oil
and gas fields. And as a result of the outflows of hard currency, the
value of the Egyptian pound has also been falling.
Diesel fuel is the crux of the crisis, in part because Egypt has a very
limited capacity to refine it. Diesel is also essential to much of the
economy. Not only do farmers use it to power machinery for irrigation
and harvesting, diesel truck fuel contributes to the price of almost
everything shipped.
Mr. Farash, of the supply ministry, insisted that Egypt was still
importing just as much fuel as it did three years ago before the
revolution, and he blamed the leaky distribution system for the
perception of a crisis. Tanker trucks sell diesel on the black market
before reaching gas stations, he said, and thieves run phantom gas
stations that exist only on official maps.
“Did you hear about the donkey who drank diesel and died?” Mr. Farash
asked, suggesting that anxious farmers had filled barns with fuel.
“There is enough,” he said, “but people are behaving like there will not
be enough, and a large part of the problem is the behavior of the
people.”
He said the Morsi government was installing a “smart card” system for
tanker trucks, to track the supply of fuel and ensure that full
shipments reached their destination. “In one week or two weeks the
problem will be solved,” he said.
As for wheat — used for subsidized bread that the government says
sustains 16 million families — Mr. Farash said Egypt had enough on hand
to last through the end of the fiscal year in June. Contrary to news
reports here, he said, the government sees no need to ration it.
But he said the government was cracking down on corruption at the
bakeries, too. Instead of subsidizing flour, he said, the supply
ministry is testing another system of smart cards to pay bakers based on
the number of discounted loaves they sell, to prevent them from
reselling deeply discounted flour. Hundreds of angry bakers protesting
in Cairo have already closed streets downtown.
“Some of the bakers want to continue the old system because it is better
for them,” Mr. Farash said, “but it is illegal.”
At diesel lines in Cairo, though, truck and bus drivers say that cracking down on corruption offers little consolation.
“How can we make enough money to feed our families?” asked Ibrahim
Hussein Ibrahim, 31, who had waited in line in his bulldozer for more
than four hours on Thursday morning. He said he usually earned the
equivalent of about $10 a day in construction, but employers were
telling him they could pay him only half as much because he spent half
the day waiting for fuel.
Diesel now sells on the thriving black market for more than twice the
official subsidized price — though the black market price is still less
than $2 a gallon, less than half the price in the United States,
reflecting Egypt’s heavy subsidies.
Here in the Nile Delta, Ali Mehrous al-Dairy, the patriarch of a farming
family, said that even though his four sons waited in line at four
different gas stations overnight to fill jerrycans, in the past two
weeks they had more frequently all come home empty. Fuel is now hard to
come by even on the black market, he said, and black market fuel is
often so diluted with water it damages engines.
“By God, I don’t know what we are going to do,” he said, looking over motionless irrigation pumps empty of fuel.
If diesel is still scarce next month when the harvest begins, “There
will be a revolution of the hungry,” said Adbel Moneim Abdel Hady, 40,
another wheat farmer.
At the empty Mobil gas station in town, attendants said profiteers,
hoarders and desperate farmers were already threatening them with
knives, clubs and shotguns. At harvest time, “People are going to kill
each other,” said Hamdy Hassan, 37, a truck driver hanging out at the
shuttered station.
COPY http://www.nytimes.com
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