2023-12-07 11:06:42
This weekend, Egyptians are called to the polls to give a third term to General al-Sissi. A vote against a backdrop of deep disillusionment: the economy is in a critical state, much worse than ten years ago when Abdel Fattah al-Sissi came to power.
At the moment, the inhabitants of Cairo are lining up to buy a little sugar at a high price: 60 pounds per kilo compared to 12 in May. L’inflation peaked at 38% in September, the highest level ever. The price increase has doubled in one year. While the currency collapsed. In 2013, it took seven pounds to obtain a dollar, today it takes 30 at the official rate, more like 50 on the black market.
Over the past year, the Egyptian pound has been devalued three times. Without managing to stabilize the currency and bring in more foreign currency. The price of imported products has exploded and goods are stuck at ports for lack of dollars to pay the bill.
Impoverishment
The population has become brutally impoverished, without ever having received the dividends from the pharaonic projects launched by President al-Sissi. The new Suez Canal, launched in 2015, is one of the few investments that has benefited the Egyptian economy. Canal revenues soared in 2022, to more than nine billion dollars. It is one of the prosperous sectors with the export of natural gas.
On the other hand, the prestigious investments desired by President al-Sissi were financial pits. It was necessary to find 45 billion dollars to finance the new administrative capital built in the desert. By resorting to borrowing, the State squandered the money that did not exist in public coffers without fundamentally changing the economy. Because these investments have mainly fattened the military, the main beneficiaries of the contracts. In Egypt, the army has a virtual monopoly on the most profitable activities.
Crisis risk
The public debt has soared and Egypt can no longer meet its repayments. According to the Bloomberg agency, it is the country most exposed to the risk of a debt crisis, after Ukraine. It is also one of the countries that borrowed the most from the International Monetary Fund (IMF). The Fund has intervened four times since 2016, willingly to support a key country in the Middle East, politically and socially fragile. The economic damage caused by Covid-19, then the war in Ukraine, largely justified the following loans from the IMF.
But seeing that the requested reforms are constantly postponed, the Fund now conditions the payment of the three billion dollars recently promised to the implementation of shock measures, to finally liberalize the economy, freeing it from the yoke of the army. The government must at all costs complete the overdue privatization program. A new devaluation is looming, with the eventual liberalization of the foreign exchange market. These IMF requirements will initially aggravate household difficulties, unless they are further postponed. With the war in Gaza on Egypt’s doorstep, its economy is once again hit hard by an external event making its financing needs even more urgent. We will see if Cairo will benefit from a rescue plan by avoiding the requested reforms.
Read alsoEgypt: faced with the crisis and power cuts, traders forced to adapt
#Egyptian #economy #critical #condition