In Egypt, Marshal Sisi’s dreams of grandeur dashed by the reality of a bankrupt economy
Abdel Fattah Al-Sissi’s dreams of grandeur are collapsing. The policy of megaprojects that the Egyptian raïs has promoted since he came to power in 2013 to adorn Egypt with a modernity resembling a Gulf monarchy, the new capital at the Grand Museum in Cairo, is no longer fashionable.
The era of lavish spending, made possible by the largesse of the godfathers of this same Gulf and the digging of the public debt, is over. The war in Ukraine precipitated the collapse of the Egyptian economy. The International Monetary Fund (IMF), encouraged by Riyadh and Abu Dhabi, is calling for an austerity cure and a change of economic model. The time has come, he says, to get out of state interventionism, on which the army has built its economic empire, to bring back foreign investment and restore its place to the private sector, at half mast.
Cairo no longer has the luxury of dithering. As it slowly recovered from the effects of the Covid-19 pandemic, Egypt saw 23 billion dollars (21.4 billion euros) of foreign capital evaporate with the global shock wave caused by the war in Ukraine, in the spring of 2022. It finds itself, short of cash, faced with an insolvent equation: repaying a debt estimated at 93% of its gross domestic product (GDP).
The weaknesses of this emerging economy were supposed to have been erased thanks to the plan designed with the IMF after the 2016 crisis. They have reappeared, gaping. The IMF and the Gulf sponsors have finally learned the lesson and are demanding that Cairo reduce the footprint of the state and the army on the economy.
Back to square one
The IMF granted, in December 2022, a new loan of 3 billion dollarsmaking Egypt one of its main debtors. “It’s a small loan, made to buy time, test the reformist will of the regime and see if the Gulf decides to invest”, analyzes Ishac Diwan, professor at the Paris School of Economics. The financial institution is counting on investors from the Gulf to fill the external financing gap, estimated at 17 billion dollars for the next four years.
At the start of the crisis, Riyadh, Abu Dhabi and Doha came to Cairo’s rescue with $23 billion in Central Bank deposits and investments. But, unlike 2016, when Riyadh and Abu Dhabi signed a blank check to President Sissi to stabilize his power, they are now setting their conditions.
“The Gulf has a geopolitical interest in Egypt, but the commitment to support it is starting to become a burden. He wants to rationalize his investments by making [le pays] more productive “explains Amr Adly, a political scientist at the American University in Cairo.
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