Militarising Egypt’s economy wastes the public budget on infrastructure and megaprojects

Abdel Fattah al-Sisi did not invent the military’s attachment to controlling the economy for political purposes, but after decades of military intervention in the economy, the decline continues in Egypt according to all significant social and economic indicators. As a result of this military intervention in the economy, Egypt is allocating the public investment in large infrastructure projects, unproductive sectors, and an inefficient defence industry. This has resulted in an enormous cost to the well-being of ordinary Egyptians.

The role of the military establishment in the Egyptian economy has become larger and more ambiguous, with apparently negative effects, especially when we take into account the deteriorating position of Egypt in the global economy from the 1950s until today. With the rapidly growing population of more than 100 million people, the majority of whom are young, the political consequences of such a decline could be grave.

The lack of jobs, coupled with the military’s desire to control the political and economic space, is a recipe for hitting a political dead end, or worse: the outbreak of a rebellion. The most obvious manifestation of poor economic performance is the fascination with mega infrastructure projects. While Egypt certainly needs to modernise its dilapidated public infrastructure, its economic policies increasingly appear to be bragging projects, an end in and of themselves rather than a means of economic or social development.

The military is indeed investing in roads, bridges, and construction projects that meet the needs of a small group of wealthy Egyptians but leave many of the poorest segments of society without basic facilities and services. While economists measure Egyptian GDP growth at about five per cent annually, the reality is that the rate at which the benefits of growth in Egypt reach the poorest segment of society is almost negligible and may even be negative. The military’s investment in public housing may be positive, as there is an enormous shortage of affordable public housing in Egypt. However, unlike affordable housing, much of the military’s investments fail to benefit the masses or the average Egyptian citizen, while social and economic indicators worsen or stagnate.

The World Bank notes that the decline in per capita income since 2016 and the increase in poverty, inflation, and population will only exacerbate Egypt’s social and economic challenges. Moreover, public debt in Egypt is on the rise, and as recent rounds of debt rescheduling terms for the International Monetary Fund and World Bank have shown, people often pay the price through increased prices for goods and services and regressive tax policies.

In other words, ordinary citizens pay off the accumulated debts, which exacerbates the decline in their social and economic levels. In contrast, the new capital is described as a smart city with modern technological innovations. Still, it is unlikely to rid the country of rampant corruption or lead to the modernisation of the bloated public sector. It is likely to be built with the aim of immunising the president against potential protests.

According to Basma al-Momani, a political science professor at the Canadian University of Waterloo, Egypt’s success or failure in economic development has regional, if not global, implications. “While Egypt may have served as a role model for developing countries in previous decades, it is now likely to be viewed from a less flattering perspective, that is, just being perceived as too big to fail,” she adds. While the Arab Gulf states have supported Egypt in recent years with billions of dollars in loans and grants, the sharp drop in oil prices means that these countries will be less willing and able to support the Egyptian government. Moreover, remittances to Egypt are likely to decline as oil prices drop and the regional economic outlook dwindles.

Countries in the Middle East and North Africa may prefer not to face the challenge of hundreds of thousands of Egyptians who have less incentive to return home due to the deterioration of the Egyptian economy. As Momani adds, it is unlikely that the military institution will succeed as an economic saviour to Egypt. She says, “The military establishment faces great expectations related to the growing needs of the people, but it is not agile, creative, and able to do so.” She adds: “The corona pandemic has also revealed the need for public confidence, leadership, and investment in social welfare and welfare. However, al-Sisi’s administration insisted on maintaining the pace of building bragging projects such as the new administrative capital.” She concludes: “Egypt’s failure will be enormous for the entire Middle East and North Africa region and deserves political attention, but the international community’s willingness to accept al-Sisi as a force of stability and ignore the social, economic, and perhaps political crisis is an existing fact. Still, it is short-sighted.”