Egypt with around 107 million inhabitants, is the region's most populous nation. It also has the Middle East's most powerful military. In Egypt food prices have doubled, salaries have halved, the value of the Egyptian pound plummets and banks are restricting withdrawals.
Egypt's currency has devalued by around one-third since late October and inflation currently stands at over 20%. Some economists suspect it's even worse than that. They put the unofficial rate — which includes Egypt's huge informal economy — as high as 100%.
Could Egypt soon become "the new Lebanon?"
"There are remarkable similarities between Lebanon's now abjectly failed economy and Egypt's struggling one," Robert Springborg, an adjunct professor at Canada's Simon Fraser University, wrote in a 2022 report for the Washington-based Project on Middle East Democracy. "The consequences of the collapse of confidence in Lebanon have been devastating but they would pale into near insignificance if repeated on an Egyptian scale," he warned.
Egyptian poverty levels, for instance, are nearing those of Lebanon with at least 60% of Egyptians living in or near to the poverty line.
"And then there's the willingness of the political elite to callously enrich themselves at the expense of the state and the public," said Timothy Kaldas, an expert on Egypt's political economy and a policy fellow at the Tahrir Institute for Middle East Policy. "That's definitely also something the two countries also share."
Egypt "on the brink of a financial and economic abyss," Rabah Arezki, a former chief economist at the World Bank's Middle East and North Africa Region, wrote on January 18.
The pandemic decimated Egyptian tourism, one of the country's big money earners. Then the war in Ukraine disrupted wheat supplies to the country, the world's biggest importer of wheat.
Since 2014, the Egyptian government, led by President Abdel Fattah el-Sissi, has promoted national "mega-projects" including the world's longest, driverless monorail — at a cost of $23 billion (€21 billion); and a whole new city, the $50 billion (€46 billion) New Administrative Capital, near Cairo. These have artificially driven growth in the country.
Many of the projects are also connected to the Egyptian military's vast money-making business network.
Policies like these, allowing state and military-owned enterprises to dominate the economy, have depressed the private sector in Egypt, discouraged foreign investment and seen the country become more dependent on foreign credit for its survival. Egypt owes over $155 billion (€138 billion), and roughly one-third of its national income goes toward servicing that foreign debt.
"The reason why the pandemic and the Ukraine war have had such a big impact is because of the investment strategy led by Sissi for nine years: Massive spending on huge projects, some of which were totally unnecessary or poorly conceived," Yezid Sayigh, a senior fellow at the Carnegie Middle East Center in Beirut, told DW. "This made Egyptian finances very vulnerable, without providing the economy with real gains."
A new IMF bailout may bring Egypt back from the brink yet again but it's hard to say whether it can provide real relief for long-suffering citizens. The government and the country's elites will try to retain their advantages and wealth, all the while seeking to wriggle out of concessions around, for example, decreasing the military's economic power, Kaldas said.
Economic crisis: Is Egypt the 'new Lebanon?' – DW – 01/20/2023
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