Is Egypt willing to save itself?
A man buys food at a restaurant in Cairo, Egypt, March 22, 2022. (AP Photo/Amr Nabil, File)
Less eggs, less meat, and more chicken feet. While at first glance this may sound like a bizarre nursery rhyme for some, Egyptians know all too well that this is what state-run media in Egypt considers a good alternative to the crippling inflation that has become impossible for anyone in the country to ignore. When speaking to Egyptians today, it is clear that many are starting to lose patience with the consistently ailing economic situation. “We legitimately don’t know where the country is headed. As the head of a business that has been in Cairo for over 30 years, I feel like I am scrambling to just survive as a business and I’ve (metaphorically) turned into a homemaker just trying keep their modest household afloat,” explained a General Manager of a multinational corporation in Cairo who preferred to stay anonymous. In this calendar year, there have already been three devaluations of the Egyptian pound, falling from 16 EGP to 33 to EGP the US dollar, with many expecting more devaluation to come in the future. Food inflation has reached 48 percent, which is an all time high for a nation already struggling with inflation in years prior. In a report published by the World Bank in April 2019, it was calculated that some 60 percent of Egypt’s population is either poor or vulnerable, with over half the nation living under $2 a day.
The IMF and its claws
The Egyptian economy has been in a constant state of ailment for decades. To combat the most recent set of economic struggles, the Egyptian regime has once again turned to the IMF, the major financial agency of the United Nations, for a life raft, with a 46 month economic reform plan with a loan worth 3 billion USD. This is the third IMF loan the Egyptian government has taken in the past seven years, making Egypt the second largest debtor to the IMF in the world with over 23 billion dollars owed to the IMF. Likewise, the IMF is not the only debt collector from Egypt, with the nation's public debt reaching $155 billion in external debt, which is equivalent to about 86% of its annual economic output.
Ultimately, fighting this heavy burden of debt, along with a trade deficit of over $33.47 billion dollars and a stark deficiency of $20 billion of foreign investments since 2021, simply cannot be done by solely relying on the IMF. The IMF has not only manipulated the structure of the Egyptian economy by posting growth rates that are exaggerated by levels of debt, but has deliberately dragged Egypt into a series of different loans, knowing well that the organization will have a significant advantage in negotiating. Due to the crippling nature of the economic situation in Egypt and the desperation of the Egyptian regime for help, which in part is due to the previous IMF demands of Egypt, the IMF has given itself the upper hand in negotiations with the Egyptian government. This allows them to have far more influence in Egyptian economic policy in an unsettling neo-colonial manner.
Plenty of blame to go around
While the IMF’s draconian neoliberal policies for developing countries plays a role in the crippling economic circumstances in Egypt, the Egyptian government must be held accountable for its subpar economic decision-making that led to the IMF entering this grim scenario to begin with. “The Egyptian government is serious and willing to implement the demands of the fund when the price of paying these reforms largely falls on everyday citizens, which we can see with the devaluation of the pound,” described Egyptian economic analyst Magdi-Abdel Hadi. “But when it comes to solving the issues at the heart of Egypt’s economic issues such as the stagnant productivity, weak industrialization, cronyism, lack of institutionalization, and transparency, the Egyptian government tends to be far more tenacious in negotiating when the interests of the dominant economic and political networks are questioned. As a result, the Egyptian regime will opt into circumventing economic procedures.”
This can be seen in the questionable spending methods of the Egyptian government in building a new Administrative capital for close to $60 billion and the massive economic takeover of the Egyptian military, which has led to a serious decline in the private sector. In recent years, military and intelligence services have slowly monopolized massive amounts of the Egyptian economy, single handedly controlling entire industries such as real estate, pharmaceuticals and others. It is reported that military generals are often present in meetings where economic policy is decided, and frequently have the power to veto economic alternatives if they see fit. As a result, the diminishing private sector productivity has put the government in a very precarious position with increasing domestic and international pressure mounting for change before the situation becomes uncontrollable.
Ultimately, the current situation, both politically as well as economically, is extremely fragile and completely unsustainable at the current rate. Although Egypt has struggled with economic instability and uncertainty for most of its modern history, the social contract that has been developed between the state and citizens has largely been upheld, where the state provides much needed economic and social benefits and subsidies in exchange for socio-political toleration for political transgressions and crackdowns on basic freedoms. However, under the current regime, many social subsidies have been cut and millions of Egyptians have had their names taken off the much needed national ration card registry along with a widespread crackdown on political rights and freedoms, with over an estimated 60,000 political prisoners and a near complete extermination of political life in the country. These actions have rendered the unwritten social contract between the state and its citizens virtually useless, and soon enough millions of Egyptians will be left no choice but to begin to question the nature of the state in their lives.
What can be expected for the future?
With such colossal pressure mounting on the Egyptian government, the key decision makers have two possible options for relieving pressure and maintaining stability:
The first, and most preferable option, would be a strategic opening of the political and economic sectors in the nation, along with the immediate release of all political prisoners. These steps will ease the mounting pressure on the government and symbolize stability and rational decision making for foreign investors and international actors. There have been some indications that the government is considering taking this path with the national dialogue set to kick off on May 4th of this year between the government and traditional opposition party, with plans to sell over 32 state companies in order to loosen the military’s hold on the nation's economy. However, many analysts suggest these are merely a tactic of smoke and mirrors to elude the IMF and the rest of the international community into believing that the Egyptian regime is reforming itself, with prominent journalists and rights workers still languishing in prison extrajudicially, and the military continuing to control key economic decisions. Nevertheless, the government still has the time and capacity to shift Egypt into a more internationally respected economic and political situation if there is a willingness to do so.
The second option would be an even more aggressive doubling down on marginalizing all alternative economic positions and opposition voices. With no overseeing body, transparency, or critical local media that can keep the regime in check or relay to it the position of everyday Egyptians, the regime will unavoidably make further decisions to the detriment of the people. While this option would save the regime the headache of having to play politics, this will lead to a larger headache of mass public anger that will inevitably explode in an uncontrollable manner, which will plunge Egypt into a vicious cycle of instability that the nation has not seen in its modern history, with more poor, hungry, and angry people than ever seen before.
Nevertheless, if the government decides to truly open the political and economic sphere further, a large heap of the responsibility then shifts onto what is left of the civil society and opposition groups inside the country. What is needed for the coming period is collective political action and discussion from all those in civil society and prominent public intellectuals inside Egypt to politically organize to the largest extent possible. We have already seen how effective the smallest bit of political organization can be during this period, with the shocking election of dissident journalist Khaled El Balshy as the new head of Egypt’s journalism syndicate last month. El Balshy’s opponent, Khaled El Meri, was heavily backed by the state, given far more air time during the elections, and was largely seen as a runaway winner only weeks before the elections. By having an extremely organized, focused, and dedicated campaign, El Balshy was able to beat El Meri and win the seat, which is a prime example of how crucial organizing of this sort is for the nation's future.
If the government decides to go down the first path, this political organization can effectively demand concrete political and economic reforms from the government in a unified manner, increasing their strength in negotiations and thus the probability of the Egyptian government approving. If the second option is chosen, the political discourse and negotiation, assuming it is done now, can present a logical, hopeful, and most importantly, peaceful alternative for people fed up with the current regime and its economic and political stubbornness.
Ultimately, Egypt is entering a new and transitionary period in its modern history, and the current situation will inevitably change, sooner rather than later. The government has the power and ability to change how and when these much needed changes will happen. Whether they will willingly make these changes or have the wave of change eat them up is up to them to decide.