An Egyptian man exchanges foreign currency in Cairo. A Cabinet shake-up… (Nasser Nasser / Associated…)
CAIRO — President Mohamed Morsi replaced Egypt's finance and interior ministers Sunday in a Cabinet reshuffle aimed at calming growing economic and security pressures over unemployment, poverty and plummeting foreign capital reserves.
The nation's dire financial predicament — the Egyptian currency has tumbled to new lows against the dollar — is likely to prove Morsi's biggest challenge, despite its having been overshadowed by political unrest and the passage of an Islamist-backed constitution. The president and his Muslim Brotherhood party have yet to convince foreign investors and working-class Egyptians that they can rescue the economy.
The Cabinet changes, which also strengthened the Brotherhood's hold on the government, were announced a day before Morsi was to meet with representatives of the International Monetary Fund over an anticipated $4.8-billion loan to Cairo. Morsi has promised tax increases and food and energy subsidy cuts to prove he is willing to enact unpopular austerity measures.
Finance Minister Mumtaz Saeed was replaced by El-Morsi Hegazy, an expert on finance linked to Islamic principles and a professor at the University of Alexandria. Interior Minister Ahmed Gamal Eldin was replaced by one of his deputies, Gen. Mohamed Ibrahim. Morsi has been suspicious of the Interior Ministry, which controls domestic security forces that still include officers who were loyal to deposed President Hosni Mubarak.
Eight other new ministers, three of them Brotherhood members, were also named by Morsi in his effort to gain confidence from a disillusioned public.
Over the last two months, Morsi has expanded his powers and hurried through a much-criticized Islamist-backed constitution. The moves resulted in protests by Egyptians who said he was advancing the Brotherhood's agenda at the expense of a country whose foreign currency reserves have fallen by more than half, to about $15 billion.
Egypt's central bank has called that figure a "critical minimum" level.
Morsi contends that his actions have been necessary to open the way for parliamentary elections and to allow him to press his policies without interference from Mubarak-era holdovers. But Brotherhood members have acknowledged that their political clout will suffer further if the economy is not quickly mended.
"There is no chance for the president's reshuffle to bring back people's trust in the government and economy," said Magdy Sobhi, a political economist with the Al Ahram Center for Political and Strategic Studies. "While the new finance minister has done extensive research on Islamic finance, he has no political or governmental experience. You have severe budget constraints and debt. The country is in a terrible economic situation."
He added: "If the IMF deal isn't closed quickly, that means we won't be able to obtain loans or aid from other nations. In this situation, bankruptcy is not far off."
Morsi's erratic handling of the economy has symbolized the Brotherhood's clumsy and volatile course toward political Islam after 30 years of Mubarak's autocratic secular rule. In December, the president retreated from a program of tax increases to avoid a public backlash ahead of the constitutional referendum. That delayed the IMF loan and raised questions about the soundness of Morsi's economic strategies.
Months of political turmoil and deadly street protests have further shaken the economy, leading to labor strikes and an ailing tourism industry. Many in this country, where more than 40% of the population lives on $2 a day, were expecting better economic times after a popular uprising unseated Mubarak almost two years ago.
Fearing further devaluation of the Egyptian pound, which on Sunday traded at 6.45 against the dollar, many Egyptians have begun buying dollars, prompting banks to limit the practice. And the Brotherhood has indicated the financial turmoil is far from over.
"The challenges require concerted efforts and I call on all political powers to avoid their differences and work with the new government in order to cross this economic crisis peacefully," Saad Katatni, head of the Brotherhood's Freedom and Justice Party, said in a statement.
Special correspondent Reem Abdellatif contributed to this report.