EgyWatch – June 8, 2019
Before the 2014 presidential elections, Abdel Fattah al-Sisi said in an interview that removing subsidies will never be an option, especially those of electricity and fuel; only once the people have become enriched and salaries are raised. However, after he took office and for the last five years, he has implemented severe economic measures as part of the program of the International Monetary Fund. These measures have caused widespread poverty and economic downturn.
Before Sisi’s presidency, Egypt suffered from an economic crisis. According to studies conducted by the World Bank, poverty rate was around 24.3%, with huge geographic variations ranging from 7% in Port Said to 66% in some upper Egypt governorates.
Despite Sisi’s promises about keeping prices low in consideration of people’s financial ability until productivity and revenues rise, his reign began with raising electricity and fuel prices in the first month, a measure which was repeated five times with increases ranging from 15% to 70%. Consequently, the prices of food and consumer goods was impacted, with inflation rate hitting its highest levels over 30 years at 33% in 2017.
The series of increases in fuel and electricity came as a condition of the International Monetary Fund after the Egyptian government’s agreement of a $12 billion loan in 2016. Successive waves of elevated prices ensued with severe increases, especially of public services including trains, subway tickets and formal procedures fees.
The most significant impact on Egyptians was on November 3, 2016, when the government took a decision of floating the currency following a period of price manipulation. The exchange rate increased from 7 EGP per USD before Sisi’s presidency to 18 EGP per USD, signifying a fatal blow for the people.
The above-mentioned measures were believed to lead to an improvement in Egypt’s economic situation, especially after the removal of a huge part of responsibilities from the general budget through cutting subsidies.
However, the people suffered greatly under these measures, and the general budget suffered a greater burden as a result of the expanding debt approach followed by Sisi. Whilst external debts were $47 billion before Sisi’s presidency, at the end of December 2018 it hit $96.6 billion, as well as 4.1 trillion EGP domestic debts ($241.9 billion), with 971 billion EGP used for debts and interests payments, i.e. more than 60% of the general budget which is estimated at 1.5 trillion EGP.
Over the five years of Sisi’s presidency, the prevailing theme was that of crude propaganda for huge projects, solely for marketing and media consumption, while draining the country resources in vain. High on the list of such endeavours was the widening of the Suez Canal that cost more than $4 billion. Income of the Canal and its corridors decreased systematically because of the global trade recession and the region’s disturbances which drove major international economies to take alternative routes.
Another project on the list of huge expenditures was the construction of a New Administrative Capital for the ruling sector. The project was estimated to cost $45 billion, with no expected revenues and no expected improvements of the budget or living standards. Sisi said that these projects were implemented without a feasibility study because such studies were a waste of time.
Moreover, a mammoth expansion of the army in the field of economy accompanied these projects. According to several researchers, Sisi’s rule witnessed a growing role of military-affiliated foundations and companies in several fields to ensure full control of the country’s resources. This expansion was wider than that during Hosni Mubarak’s rule. Sisi gave, through presidential decrees, the intelligence, interior ministry and army the right to establish private companies and to implement different investment projects.
Additionally, Sisi has shown excessive generosity with those in the armed forces through successive salary increments and revisions, whilst leaving the majority of the population battling against poverty, high prices and inflation. Poverty levels have hit unprecedented rates with the World Bank estimating that 60% of Egyptians are considered poor. Some researchers think that this figure is optimistic considering realities on the ground.
The life of Egyptians has become a struggle due to unsuccessful economic measures, bad management of state resources and severe mistakes in priority setting.