Cairo: Egypt's fiscal crisis is adding to pressure from protesters and politicians for the ruling military council to hand over substantial powers to a civilian government long before mid-2012, when the army has said it would return to barracks.
Rising debts, now worth 85 per cent of gross domestic product, a surging budget deficit and foreign reserves tumbling to a level that by January may provide just two months import cover provide all the ingredients for a text book fiscal crisis.
Combustible mix
That is a combustible mix for any cabinet and may encourage the army to seek to distance itself from Egypt's economic woes and give the new government far more powers before it becomes too tarred with the brush of a financial crisis.
For now, the army insists it will keep sweeping powers until a presidential election now set for June. But pressure for a swifter transfer began building up during last month's protests against army rule and is echoed by politicians who say they want more powers after the first round of a parliamentary election.
Egypt's economic travails may prove a final straw for the Supreme Council for the Armed Forces.
"The [economic] gyration you've seen ... creates a lot more pressure on the Supreme Council to act in a manner which sustainably resolves these tensions," said Raza Agha, RBS's senior Middle East and North Africa economist.
Lowest level
"Even if it's not well understood on the street, it is understood very well by the government," he added.
In recent days, the Egyptian pound weakened to its lowest level in nearly seven years against the dollar, the cost of government borrowing rose to its highest in three years and Standard & Poor's lowered its credit rating on Egypt, saying a "weak political and econ-omic profile" had worsened. All this is happening in a policy vacuum.
As one of its concessions, the army accepted the resignation of the cabinet, though the move was not enough to get demonstrators to pack up tents in Tahrir Square.
