With another meeting earlier this week in Cairo, the Egyptian government continues its tortuous negotiations with the IMF about a $4.8 billion loan (...)
Despite a growing sense of urgency, the Egyptian government has not been able, or willing, to close a deal with the IMF. In fact, in the most recent round of talks, the government back-pedaled away from the set of economic reforms it put on the table last November, and now proposes more gradual steps to combat its fiscal deficit. Among the major sticking points with the IMF is Egypt's costly and unsustainable regime of subsidies, which currently consumes close to a third of the government's budget.
While it is widely recognized that food and fuel subsidies are expensive and inefficient, Egyptian leaders do not want to touch the political third rail of subsidy reform. Who can blame them? Seared into the memory of just about every Egyptian politician is the winter of 1977, when bread riots nearly toppled the government of Anwar Sadat.