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, acknowledging deep concerns over the constitution.
"President
Morsi, as the democratically elected leader of Egypt, has a special
responsibility to move forward in a way that recognizes the urgent need
to bridge divisions, build trust, and broaden support for the political
process," said Patrick Ventrell, acting deputy spokesman. "We hope those
Egyptians disappointed by the result will seek more and deeper
engagement. "
He said Egypt "needs a strong, inclusive government to meet its many challenges."
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." The resignation
could not be immediately verified because it came so late at night.
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. It said the constitution has
passed with a 63.8 percent "yes." Turnout of 32.9 percent of Egypt's
nearly 52 million registered voters was lower than most other elections
since the uprising nearly two years ago that ousted authoritarian leader
Hosni Mubarak
Morsi is expected to call for a new election of parliament's lawmaking lower house within two months.
In
the meantime, the traditionally toothless upper house, the Shura
Council, will hold legislative power. But the chamber is overwhelmingly
Islamist-dominated so any laws it passes could spark a backlash from the
opposition. Many fear a legal crackdown on independent media, highly
critical of Islamists.
In a bid to reach out to opposition, the
leader of the Muslim Brotherhood said he hoped the charter will be a
"good omen" for Egyptians.
"Let's all begin to build the
renaissance of our country with free will, good intentions and strong
determination, men, women, Muslims and Christians," Mohammed Badie said
on his Twitter account.
But the opposition said the passing of the
document is was not the end of the political dispute. Critics fear the
constitution will usher in Islamic law in Egypt and restrict personal
freedoms.
"This is not a constitution that will last for a long
time," said Khaled Dawoud, a spokesman for the main opposition group,
the National Salvation Front, vowing to fight for more freedoms, social
and economic rights.
In a sign that the new front for the
opposition against Morsi's policies may be the economy, Dawoud said the
Morsi administration was "confused" both on the political and economic
fronts.
"We want stability and economic prosperity like everybody
else. But we don't believe that the policies of Morsi and the
Brotherhood will lead to more stability," he said.
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. The reserve level has been slightly
propped up by some Qatari deposits in past months.
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," said Cairo resident Mahmoud Kamel
after unsuccessfully visiting one exchange office. "I want to exchange
money because I'm afraid the Egyptian pound will not have any value
soon."
The dollar rush prompted the Central Bank of Egypt to issue
a statement on Monday calling on banks not to listen to rumors
circulating about the fiscal health of the nation.
The bank
declared its commitment to guarantee all deposits in local and foreign
currencies to banks in Egypt and said banks are "financially strong
enough."
There was one particularly nerve-rattling report in
recent days that longtime Central Bank Governor Farouk Okdah had
resigned. The report came on Saturday during the second and final round
of voting on the constitutional referendum.
Official media quickly
retracted the news after reporting it. The governor then turned up at a
meeting of the government's economic team on Sunday in an apparent
attempt to quell nervousness over the state of the economy.
Egypt's
currency had been stable trading around 6 pounds to the dollar for the
first half of the year. It has since slipped, especially in the past two
months as political instability worsened. The dollar was selling
Tuesday at 6.18.
Rumors swirling around impending tax hikes,
subsidy cuts and other bread-and-butter issues have heightened the
public's concern. Around 40 percent of Egyptians live just at or below
the poverty line of surviving on around $2 a day.
In a sign of the
worsening economy, the number of people living on under $1 a day rose
to 25 percent in 2011, up from 21.6 percent in 2009, according to
government statistics released last month.
Promises that the
Islamist-drafted constitution would bring about the stability Egyptians
crave were dismissed by economic experts who warned that without enough
currency reserves, there is little to stop the pound from falling.
"The
instability of the foreign exchange rate is not at all detached from
the political instability. It is a reflection and clear mirror to what
is happening," said Haytham Abdel Fattah, head of the Treasury and
International Markets Manager at Industrial Development Bank.
Associated Press