Donors keep bailing out Egypt because they are terrified it might collapse if they do not. Yet supporting a regime whose refusal to reform makes Egypt steadily poorer and its people steadily angrier is no recipe for long-term stability
. The Egyptian pound lost half its value over the past year and has been the world’s worst-performing currency in 2023. On January 5th the government devalued it for the third time in less than a year. Nearly half of the state’s revenue goes to servicing its debts, which amount to 90% of. Officially, inflation is running at 21%. The price of food is rising even faster. But official figures have not kept up withThis has brought misery to the Egyptian people.
Egypt’s economic crisis has been a long time in the making, and is partly caused by forces beyond the state’s control. Russia’s invasion of Ukraine has hurt Egypt badly, since it is the world’s biggest importer of wheat and its two biggest suppliers have usually been Russia and Ukraine. Higher wheat prices have made it ruinously expensive for the government to provide the ultra-cheap, subsidised bread that Egyptians have come to expect .
But the country’s main underlying problem is the stranglehold on the economy exercised by the state, and specifically the army. Official statisticians are strangely reluctant to provide a measure of this. The government has said that the army controls just 1.5-2% of output. The true extent of its influence, both direct and indirect, is far greater. And under the rule of President Abdel-Fattah al-Sisi it has expanded.
The army’s empire now includes everything from petrol stations to mineral water and olives. It has hooked the fish-farming market and engineered control over carmaking. The security services have bought up big chunks of Egypt’s media. The army built a huge new cement plant, causing a supply glut that crushed private firms. In industry after industry it squeezes out or scares off competitors, deterring private investment.
Donors keep bailing out Egypt because they are terrified it might collapse if they do not. It is the most populous country in the Middle East and a key Western ally. An implosion might send fleets of refugees across the Mediterranean. These fears are not irrational. Yet supporting a regime whose refusal to reform makes Egypt steadily poorer and its people steadily angrier is no recipe for long-term stability. Egypt’s frustrated Gulf allies are becoming less generous.
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