An Egyptian woman walks trough an alley in the al-Azhar quarter carrying a tray of fresh bread, in Cairo, Dec. 1, 2011. (Bernat Armangue/AP)

The housewives and breadwinners stepping out of a Cairo supermarket with bags of groceries agreed on one thing. “The prices are very high,” Sabah Fehmi, 58, said earlier this month. “The economy has been very bad after the revolution.”

One after another, fellow shoppers in Nasr City complained about how food prices have risen since the 18-day winter uprising that toppled President Hosni Mubarak. There were other problems, too. A stockbroker said he had lost hundreds of thousands of Egyptian pounds as the market slumped. A livestock importer said his business had declined.

Like many Egyptians, these people said they rejoiced when Mubarak stepped down in February. But after nearly 11 months of de facto military rule coupled with intermittent violence, such as the clashes that killed 12 people this past week, and an uncertain political landscape, they are feeling the strain of an economy stretched to the breaking point.

Egypt’s economy grew at just 1.2 percent this year, down from 5.1 percent last year, according to International Monetary Fund estimates. State media last month reported that the unemployment rate was 11.9 percent, the highest in 10 years, and analysts say the true figure could be much higher.

The instability has hit the tourism industry hard, scaring visitors away from the country’s historic monuments and sunny beaches. Foreign investment has stalled as investors in energy projects, construction and other sectors wait to learn whether the military leadership will remain in power or be overthrown in a “second revolution” that activists called for last month. Although parliamentary elections are underway, and a presidential election is expected by June, it remains unclear which party will govern the country, what its economic policy will be and how much power the military will cede.

“The light at the end of the tunnel is not clear yet,” said Magda a-Sayyid Kandil of the Egyptian Center for Economic Studies. “We are still going through a period of instability.”

Reserves dwindle

The economic impact of Mubarak’s resignation was initially manageable because Egypt had $36 billion in foreign currency reserves at the beginning of this year, Kandil said. But the prolonged unrest and uncertainty have caused the reserves to dwindle every month, and they are now around $20 billion, according to the Egyptian Central Bank.

That level is barely enough to cover three months of imports, Kandil said. Because the government imports most of the country’s wheat, the prospect of shortages of subsidized bread, a staple for most Egyptians, looms in the first months of 2012, she said.

The army — buoyed by $1.3 billion of funding annually from the United States — has long been an economic force in the country, with factories, supermarkets and construction companies owned and run by current and former military officials. The military rulers granted a $1 billion loan to the Central Bank last month,but some critics dismissed this as an effort to disguise their poor handling of the economy since taking over.

“They have mismanaged the economy,” said Robert Springborg, a professor at the Naval Postgraduate School in California.

For example, the military council kept Mubarak’s finance minister, Samir Radwan, in his post but cut his proposed budget so that it was not necessary for Egypt to accept planned international loans. The military’s rejection of a much-needed $3 billion loan from the IMF in June was at least partly due to a nationalistic aversion to accepting international money, Springborg said.

Karin Maree, a Middle East analyst at the Economist Intelligence Unit, agreed that there had been “11 months of very ineffective policymaking,” and added, “It is going to stay that way until a government with real legitimacy is elected.”

The popular uprising that ousted Mubarak was in large part driven by Egyptians’ anger at the gap between the country’s rich and poor. Mubarak had begun to sell off state assets, including factories and other state-owned businesses, to private investors.

In light of the mood of the people, the generals had little choice but to implement populist measures, Maree said, pointing to their decisions to raise the minimum wage for government workers and maintain subsidies on fuel, both huge drains on government finances.

Hazy visions for a new Egypt

As political parties compete in multi-phase elections for seats in a civilian government due to take control next year, they are pitting economic policies against one another.

The ultraconservative Salafist Nour party, which has won at least a fifth of the vote, calls for Islamic rules to govern banking and finance and would ban beach tourism and the sale of alcohol, which could further impact the vital tourism industry.

The more moderate Muslim Brotherhood, which has performed the strongest at the polls, would concentrate on improving agriculture and production from Egyptian industries, said Abdelhafidh Essawy, an economist and member of the group’s Freedom and Justice Party. The party would allow the consumption of alcohol in beach resorts and private homes.

The liberal, secular parties that formed in the wake of this year’s uprising — which have trailed the Islamist parties by a wide margin — are divided and have little coherent economic policy.

The sporadic fighting that has engulfed the center of Cairo and uncertainty over the economic direction of a new government are discouraging investment.

But equally off-putting is ambiguity over how much power any new government will have, after the army proposed a series of measures that would have given it powers over the government and constitution. Although the proposals were withdrawn after protests last month, doubt lingers over how much economic control the council will hand over.

“Domestic and foreign investors are looking for a sense that they have clarity on the future,” said Simon Williams, chief economist at HSBC in Dubai.