In February, we marked twelve years since Egyptians from all strands of society rose up in a unique moment of unity and popular rage, eventually ousting the long-time despot, Hosni Mubarak.
Following a brief period of Muslim Brotherhood rule under the presidency of Mohamed Morsi, a military-orchestrated coup left Abdel Fattah al-Sisi to assume power in 2013. Nearly nine years on from this critical juncture, and with the Arab Spring now a distant memory, the economic outlook facing Egypt is stark.
The Sisi administration must now contend with the harsh reality of annual headline inflation surging to 33.9 per cent in March 2023, an Egyptian pound in free-fall since its repeated devaluations, and a public debt spiralling out of control. In desperation, Sisi agreed to yet another loan package from the International Monetary Fund (IMF) in October 2022, the fourth since seizing power.  
What can account for the catastrophic state of the economy under Sisi’s beleaguered tutelage? In addressing this question, the impact of Sisi’s economic strategy, in particular, his IMF-sponsored fiscal and monetary policies, must be analysed within the context of the military encroachment upon Egypt’s political realm.
A neo-liberal model for growth
Prior to Sisi assuming the presidency, Egypt was no stranger to the neo-liberal model of economic development, underwritten by the IMF and the World Bank. However, in the midst of the current foreign currency shortage, Sisi once again turned to the IMF for a $3bn loan package in October 2022, raising the debt that Egypt owes to multilateral institutions to an astonishing $52bn. 
IMF loans have been secured on condition of the fulfilment of reforms that aim to,
“…reduce the state footprint … and strengthen governance and transparency.” 
In addition to the above, the fund expects the implementation of state policies that preserve,
“…macroeconomic stability, restore buffers, and pave the way for sustainable, inclusive, and private-sector-led growth.” 
To achieve these aims, the IMF laid out a long list of economic policy proposals that included,
“…a durable shift to a flexible exchange rate regime, monetary policy aimed at gradually reducing inflation, [and] fiscal consolidation to ensure downward public debt trajectory while enhancing social safety nets to protect the vulnerable.” 
It is thought that developing a well-managed, fiscally responsible economy, geared towards private enterprise, would give confidence to foreign investment and, in turn, stimulate growth, create jobs, and develop business and job opportunities for ordinary Egyptians.
It cannot be denied that Egypt has benefited from considerable foreign investment since Sisi became president, particularly from Gulf states such as Saudi Arabia and the United Arab Emirates (UAE) which have helped develop thousands of infrastructure projects, as well as provide much-needed liquidity.
However, as the economy continues to stall, the implementation of IMF-guided policies has yet to provide the trickle-down benefits that proponents of the model promised. Rather, the gap between the rich and poor has only widened in recent years. To understand why this has been the case, a closer look at the impact of these neo-liberal policies is required.
The poor foot the bill
In an aggressive drive to reduce Egypt’s colossal public debt, Sisi’s government has overseen a substantial reduction in public spending through cuts in fuel and food subsidies as well as public sector wage cuts.
In 2014 alone, the Sisi government announced a food and fuel price increase of up to 78 per cent whilst also announcing cuts to fuel and food subsidies. Whilst the IMF argue that these reforms are entirely necessary for a functioning and sustainable economy that is able to attract investment – ultimately benefiting ordinary Egyptians – the short-term impact on the working class has been horrendous. For Egyptians dependent on public subsidies to survive, the increases in food and fuel costs have only exacerbated their struggles to make ends meet, demonstrated by a poverty rate recorded at 72 per cent in 2017, an 8.1 per cent increase from 2015. 
To further exacerbate the problem, the Sisi administration has leant heavily on consumption taxes for quick and efficient resource generation, making up 50 per cent of the total tax revenue in 2017. In the same year, the Egyptian Minister of Finance, Amr el-Garhy, announced that the recently introduced Value Added Tax (VAT) would increase to 14 per cent. Previously low-tax and tax-exempt food products were now subject to the new tax system, causing prices to soar by 40 per cent in just a few months, pushing countless more Egyptians into food insecurity. el-Garhy neglected to take any measures that targeted the business class through increased corporation taxes but rather, all firms, regardless of their size or profits, were taxed at a flat rate of 25 per cent.
This regressive approach to taxation has only widened the gap between the rich and the poor, piling the pressure on an already struggling Egyptian working class. To confound the dilemma, 70 per cent of the tax revenue now goes towards reducing public debt, rather than funding development and public services. The poor, it seems, bear the greater burden of tax generation, yet receive very little back in the shape of welfare or subsidy support.
As for Egypt’s monetary reforms, the decision by the Central Bank of Egypt (CBE) in 2016 to adopt a flexible exchange rate has proven, at least in the short term, disastrous to ordinary Egyptians. As the theory suggests, this should promote foreign investment whilst absolving the need for large foreign currency reserves, with such funds instead being used for capital goods imports, thereby stimulating growth. In reality, this not only led to a 30 per cent increase in gasoline prices, but also caused the Egyptian pound to lose nearly 50 per cent of its value, again eviscerating ordinary people’s wages and savings.
More recently, and as a direct consequence of this policy decision, the CBE once again devalued the Egyptian pound by 15 per cent in late October 2022, announcing that it had,
“…moved to a durably flexible exchange rate regime, leaving the forces of supply and demand to determine the value of the EGP [Egyptian pound] against other foreign currencies.” 
The hope was that the devaluation would improve the competitiveness of exports. However, the gas industry is of the few that saw any real benefit – a sector that, by its nature, provides very little for the jobs market. Rather, the recent devaluation has only served to further push up the price of food commodities, leaving millions of impoverished Egyptians in dire straits.
Another aspect of Egypt’s IMF-driven reforms is the privatisation of state assets with the aim of creating greater efficiency, innovation, and productivity through the profit-driven nature of the private sector. This may well prove a successful route in countries with inclusive political institutions that ensure an equal playing field whilst public sector industries are sold off.
However, it fails to take into account the elements of ‘crony capitalism’ that are rife within Egyptian politics. Following the 2013 coup, the levers of power fell firmly into the hands of the Supreme Council of the Armed Forces (SCAF) who, at this critical juncture, ensured that it was the military who were the beneficiaries of the new era of statist neoliberalism and privatisation.
Already controlling an estimated 40 per cent of the economy at the time of the coup, the military elite extended their control over a vast swathe of industries from civilian manufacturing, infrastructure, real estate, agriculture, and tourism, to mention but a few.
This rapid expansion of the military economy, their ability to take advantage of what amounts to ‘slave labour’ through military conscription, convenient tax breaks, as well as preferential access to building materials, public infrastructure, and subsidised energy, has given the military an insurmountable advantage. In this environment, small and medium-sized enterprises (SMEs) are simply unable to access sectors of the economy now dominated by the military.
Sisi’s vanity projects
With this bleak economic and political outlook, could the ambitious programme of mega projects set out by Sisi, as well as the considerable investment from the Gulf Cooperation Council (GCC) countries, be a source of hope for much-needed growth and job creation?
For as long as Sisi has been president, the GCC has invested in, and loaned enormous sums of money to Egypt with three of the GCC countries pledging a staggering $22bn in April 2022 alone. These investments have typically been concentrated in Egyptian infrastructure projects, most notably, the Suez Canal Area Development Project and the new administrative capital. Saudi Arabian and UAE-based businesses have been heavily involved in these and other infrastructure projects, while low-interest loans from Kuwait have been a much-needed source of relief for the CBE.
Whilst the stream of mega projects has no doubt generated significant demand for manual and specialised labour, it is also true that the military decide which projects to pursue as well as the subsequent allocation of contracts. This not only means that local businesses are side-lined; it also means that projects are catered to the elite as opposed to much-needed regeneration of infrastructure in poor areas of Egypt.
Moreover, the jobs created from large infrastructure projects have tended to be low wage, short-term contracts that only serve to mask a growing problem in the labour market. Furthermore, the public funds which are so enthusiastically pumped into these projects have come at the cost of much-needed social and welfare spending, a reality that is becoming ever more apparent to a disenfranchised populace.
A presidency usurped?
Given this analysis, and for the IMF reforms to stand any chance of success, significant structural changes need to be made.
This represents a potential stumbling block for Sisi, if he is to take the necessary steps to avert economic collapse. This is especially so, considering the ever increasing political and economic power wielded by the SCAF.
With his roots firmly in the military, and as its figurehead, Sisi readily exploited its considerable coercive power to quell the protests, and ruthlessly imposed his authoritarian rule. With control of the country now established, Sisi boldly stated in 2016 that,
“All the hard decisions that many over the years were scared to take: I will not hesitate for a second to take them.” 
Since then, however, aided and abetted by Sisi himself, the balance of power has shifted away from the presidency and further in favour of the military through a constitutional amendment signed in 2019.
For example, Article 234 now states that the Minister of Defence can only be “…appointed upon the approval of the Supreme Council of the Armed Forces”, effectively taking the power out of the president’s hands. 
This amendment, as well as the growing contingency of retired generals across all institutes of government, means that any attempt to build a more inclusive economy at the cost of the military is becoming an ever more distant possibility.
This context provides some understanding as to why the SCAF have yet to show the responsiveness required in addressing the mounting crises facing Egypt. The military behemoth has swelled at the cost of functioning labour unions, opposition political parties, or rival business interests in Egyptian society. Therefore, there is no entity on a national level that can check their extraordinary power.
On an international level, Egypt’s Gulf sponsors, alongside the IMF and other international bodies, recognise the geo-political necessity to protect Egypt from collapse which, in turn, feeds the military’s unhealthy sense of security generated from continued financial and diplomatic support. Ironically, bankrolling Egypt to prevent it from becoming a failed state only perpetuates the aforementioned problems and opens the spectre of an even greater cataclysm in the future.
Nowhere to hide
It should be noted that the severity of the current economic crisis has been, in large part, triggered by a series of global events outside of Egypt’s control.
Beginning with Covid, the Egyptian economy has had to endure the hardships of OPEC+ oil price hikes, a rising US dollar, and then, the Russian invasion of Ukraine. To make matters worse, as the world’s largest importer of wheat, Egypt was dependent on both of these countries for 80 per cent of its supplies.
Whilst the impact of these unprecedented global challenges is unavoidable, and has no doubt hurt many other nations, for Egypt, it has only served to expose the profound frailties of its venal political and economic institutions. Without a substantive welfare state, subsidies for the poor, strong trade unions, or sufficient protections for SMEs, the nation has suffered considerably more than it should have. This shines the cold light of scrutiny upon a Sisi administration that has callously betrayed the hopes and aspirations of their people to feed the seemingly unlimited appetite of a narrow elite.
Furthermore, there is a glaring difference between the current political configuration and that of the Mubarak era that should be cause for concern for the SCAF. In both the 2011 revolution and the 2013 coup, the military were able to distance themselves from the regime, casting themselves as the protectors of the revolution.
However, with the arrival of Sisi, alongside an administration packed with military officials, the role of the military is now overtly front and centre of Egyptian politics. As the current crisis continues to intensify, and nearly 50 million Egyptians now live in or near a state of poverty, what now can insulate the military from the ire of a desperate populace that is drawing ever closer to breaking point?