An audio feature discussing the repercussions of the recent crash of Russian aircraft AirbusA321 on the Egyptian economy. The feature includes an interview with AUC economics professor John Salevurakis.
Photo credit: Sputnik News.
Photo credit: Sputnik News.
SCRIPT:
TAPE – Estimated time: 2:03
The recent crash of Russian aircraft AirbusA321 in Egypt’s Sinai Peninsula—which resulted in the death of 224 passengers—has caused a worldwide uproar of grief and confusion. The prospect of the tragedy being a terrorist attack has called into question Egypt’s socio-political situation, and conjured experts’ concern about the country’s economic condition.
Dr. John Salevurakis, Associate Professor of economics at The American University in Cairo is particularly interested in how the event contrasts with the recent governmental decree to devalue the Egyptian Pound, and the repercussions on subsidies and imports.
ACT (0:34)
Salevurakis: The theory is: when you devalue the pound, your exports become more attractive; it becomes cheaper for people to come [to Egypt], so you prop up the tourism industry. But that’s also a double edged sword, because when you devalue the pound to make your exports more attractive, your imports become less affordable. […] And the government has to endure higher costs of operation particularly to fund things like subsidies; Egypt imports something like 7 million tons of grain a year that has to be paid for, obviously, in foreign currency, so if it takes more pounds to do that, then obviously those have just become more expensive, and the government burden has become greater.
However, stagnating tourism and rising costs of operation are not the only factors indicating danger; foreign investment might also take a hit as a result of the uncertainty.
ACT (0:30)
Salevurakis: If I’m an investor, I don’t like the idea that we don’t know what the cause of that airline crash was, so I might hold my money back to see what that turns out to be. If it turns out to be something not terror related, then I could say to myself: ah, okay, there’s a little bit more stability than I perceived in the Egyptian system, therefore I put my money in. If it turns out to be terrorism then maybe I say to myself: ah, okay I’m keeping that out, because this foretells future uncertainty and instability. […] So more terror incidents in Egypt yields a certain downgrade in the attractiveness of Egyptian stocks and bonds.
The truth about the incident is yet to be uncovered, as Egyptian and international investigations are underway, but as every good Egyptian hopes, the country’s economy would make a swift and effective recovery.
Ahmed Refai, AUC News.