Bad Neigborhood

There is a terrible article in ZERO HEDGE about the situation Egypt.  Its foreign debt reaches 100 billion, and the interest payments consume 65% of its budget. The problem is more hopeless than Argentina ever. 

The logic is simple: increased spending on mega-projects, financed by high-interest debt, has allowed the military to rapidly expand its wealth  while the repayment of debt is financed through the appropriation of public resources, which is in turn financed by a regressive taxation system. This creates a diabolical cycle of structural poverty impossible to escape.

The mechanism is well known in Argentina where ten percent (or more) of every public infrastructure project was delivered in cash to the governing clique, while the projects were financed partly by foreign debt. More projects - more money into the pockets of the military rulers. Who cares about what the projects are or pretend to be?  It is irrelevant if it is the purchase of expensive weapons, an irrigation scheme, or building a new capital in the desert. The bigger and the stupider, the better. 

The increased influence of Gulf capital in the Egyptian economy comes with grave economic consequences. Last September, an Emirati firm acquired a 30 percent stake in the government-owned Eastern Company, which controls 70 percent of the country’s tobacco market. The deal was valued $625m.  

The article warns of increasing pauperization of the Egyptian people. This neighborhood never was good and is fast getting worse.