Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.
Early last Thursday, EgyptAir 804 disappeared over the Mediterranean, becoming the second civilian airliner in less than seven months to go down while flying either to or from Egypt. Both this incident and Metrojet 9268’s disaster of last October were terrorist acts. Tourism to Egypt, a major earner of foreign exchange, has already been flat for years and will suffer even further from these airline disasters.
The World Travel & Tourism Council (WTTC) provides figures on the total contribution of travel and tourism in Egyptian Pounds. If we convert this to U.S. dollars (USD) at the black market (read: free market) exchange rate, the results are not pretty.
Egypt’s tourism problem is only one of many facing President Sisi. For starters, dwindling foreign reserves, a half-baked currency, and elevated inflation will likely prove to be President Sisi’s Achilles’ heel. The Central Bank of Egypt (CBE) is currently reporting an annual inflation rate of 10.3 percent, but that is far from the truth. Utilizing changes in black market exchange rate data and applying the Purchasing Power Parity theory, I calculate the inflation rate to be over four times higher than what the CBE reports, hovering between 40 and 50 percent for the past several months. Egypt is lying to the world about the strength of the Pound and the severity of its inflation problems (see the charts below). And lies are nothing more than a form of propaganda.
Perhaps that’s why the press corps travelling with Secretary of State John Kerry to Egypt was not permitted beyond Cairo’s airport, as David Sanger of the New York Times reported last Wednesday. Who wants a probing press to ask embarrassing questions about the economy when you’re lying?
via http://ift.tt/1s9rwgM Steve H. Hanke