With another meeting earlier this week in Cairo, the Egyptian government continues its tortuous negotiations with the IMF about a $4.8 billion loan. The loan discussions have been ongoing for nearly two years, since soon after the fall of President Mubarak in February 2011. During that time, Egypt's foreign currency reserves have declined from roughly $36 billion to only $13 billion today, and the country faces an increasingly severe balance of payments crisis. It is literally running out of hard cash -- a dire problem since it imports much of its food and fuel. Egypt currently has less than 90 days of supply in its strategic wheat stock, an unnervingly small safety net for the world's largest wheat importer.
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.