Analysis: Egypt in political clinch as economic cliff looms

By Paul Taylor

CAIRO (Reuters) - Two years after a pro-democracy uprising, Egypt resembles a rickety bus rolling towards a cliff, its passengers too busy feuding over blame to wrench the steering wheel to safety.

Foreign exchange reserves are dwindling. Tourism is moribund. Investment is at a standstill. Subsidised diesel fuel and fertilizer are in short supply, while the cost of subsidies is swelling the budget deficit unsustainably.

The Egyptian pound has lost 14 percent of its value since the 2011 revolt. Dollars are scarce. An IMF loan that could unlock wider aid is on hold. Unemployment is rising. Public security has deteriorated, and arms smuggling is rife.

With little regard for the looming economic cliff, politicians in the most populous Arab nation are trading blows over an Islamist-tilted constitution, political violence and an alleged power grab by the Muslim Brotherhood.

To President Mohamed Mursi and his supporters in the Freedom and Justice Party, the Brotherhood's political arm, this is just a tough home stretch in Egypt's delayed transition to democracy.

With the strongest national machine, they confidently expect to win parliamentary elections in April or May, completing their conquest of the new democratic institutions, then set about reforming the country along conservative Islamic lines.

"We are going through a bottleneck," said Essam Haddad, the president's national security adviser. "We'd like to get through this bottleneck as quickly as possible, and without cracking the bottle."

Cash injections from Qatar, the Brotherhood's main foreign backer, are holding the country's head just above water, and Haddad says a big informal economy will keep Egypt going.