CAIRO – The official approval of Egypt’s disputed, Islamist-backed constitution Tuesday held out little hope of stabilizing the country after two years of turmoil and Islamist President Mohammed Morsi may now face a more immediate crisis with the economy falling deeper into distress.
In a clear sign of anxiety over the economy, the turbulence of the past month and expected austerity measures ahead have some Egyptians hoarding dollars for fear the currency is about to take a significant turn for the weaker.
The battle over the constitution left Egypt deeply polarized at a time when the government is increasingly cash-strapped. Supporters of the charter campaigned for it on the grounds that it will lead to stability, improve the grip of Morsi and his allies on state institutions, restore investor confidence and bring back tourists.
“In times of change, politics are the driver of the economy and not the other way around,” said Mourad Aly, a media adviser for the political arm of the fundamentalist Muslim Brotherhood, the backbone of Morsi’s presidency and the main group that backed the constitution.
But there are already multiple fights on the horizon.
The U.S. State Department bluntly told Morsi it was now time to make compromises.
After a spate of resignations of senior aides and advisers during the constitutional crisis, Morsi appeared to have lost another member of his government late Tuesday night when his communications minister posted on his Twitter account that he was resigning.
The minister, Hany Mahmoud, said he “couldn’t cope with the culture of government work, particular in the current conditions of the country.”
Morsi signed a decree Tuesday night that put the new constitution into effect after the election commission announced the official results of the referendum held over the past two weekends.
Morsi is expected to call for a new election of parliament’s lawmaking lower house within two months.
The turmoil over the constitution sparked huge protests that turned deadly at times. For a moment, the tension looked like it was spiraling out of control and only added to an already weakened economy.
At the height of the protests, the government called off its talks with the International Monetary Fund over a $4.8 billion loan which Morsi’s government viewed as a way to attract much-needed foreign investors, and deal with a high budget deficit.
Major foreign currency earners, such as foreign direct investment and tourism, have dropped off because of political unrest and deterioration in security following Mubarak’s ouster in February 2011.
Over the last two years, the country has lost more than half of its foreign currency reserves – from $36 billion in 2010 to around $15 billion currently.
Economic experts say that Egypt’s current foreign reserves barely cover three months of imports, which is the IMF’s minimum recommended coverage.
There were signs on Tuesday that some Egyptians were starting to hoard dollars for fear that the local currency could weaken significantly.
The run on the dollar was fueled in part by a decree issued by Morsi late Monday banning people from leaving Egypt with more than $10,000 or its equivalent in other currencies.
Some currency exchanges in the upscale Cairo neighborhood of Zamalek ran out of dollars by midday and offered only euros – a rare occurrence. Some banks, too, said they had run out of cash dollars.
“I asked around in many exchange places and can’t find dollars anywhere,” Cairo resident Mahmoud Kamel said after unsuccessfully visiting one exchange office. “I want to exchange money because I’m afraid the Egyptian pound will not have any value soon.”