Egypt’s economic crisis: Sisi between creditors’ pressure and the danger of the Army’s wrath

This April, the Africa Intelligence website, which is close to French intelligence, published a report revealing the Egyptian army’s empire in the tourism sector, where the armed forces, with their various bodies and leaders, own a group of the most luxurious hotels in Egypt, most notably a resort called “Maldives of Egypt” in Hurghada, the St. Regis Al Masa Hotel and others are supervised and managed by senior officers who are personally close to Abdel Fattah El-Sisi.

The Egyptian army’s budget comes from the state’s general budget, in addition to American aid to Cairo, and its bodies can invest in projects that others are not allowed to work on. It relies mainly on government plans to attract more tourism to enhance its profits. These massive projects are tax-exempt when Egypt suffers from an economic crisis that is the largest in modern history, with unprecedented inflation rates. Besides, according to international financial institutions such as the International Monetary Fund, Egypt needs more foreign exchange, confirming that Cairo currently needs more than $5 billion until next June.

New loan repairs are broken

In light of that crisis, Egypt reached an agreement with the International Monetary Fund at the end of last year, with financing amounting to 3 billion dollars in instalments for four years, with financing tranches from Egypt’s Gulf allies that give Cairo about 8.4 billion dollars in exchange for selling state-owned assets. However, these loans are conditional on several reforms, most notably the suspension of national projects with high spending, a flexible exchange rate for the Egyptian pound without interference from the Central Bank, the removal of total subsidies on fuel, limiting the role of the state in the economy, including private stakeholders about the army, and the inclusion of state-owned companies and the military in the stock exchange, in addition to enhancing governance and transparency.

Over the past years, Egypt has implemented dozens of projects in infrastructure and building a new capital, including high-rise real estate, bridges, and roads that need to be used more. The army and those close to Sisi had the most significant gain from the profits of its construction funds, which came from huge loans and aid from Gulf supporters, which also took place without supervision, using direct government attribution without review or feasibility study.

However, according to financial reports, the government did not implement only two conditions: raising the fuel price and the flexible exchange rate, which needs more floating now. However, the government did not limit the army’s role in the economy, especially as it circumvented this condition by announcing the offering the assets of only two companies from countless economic empires. Various projects are still expanding in projects, especially in the Sinai Peninsula. The sale of assets of profitable Egyptian companies and banks to the Gulf has been hampered due to the disagreement with Gulf investors over the evaluation of deals.

These stalled reforms made the Gulf countries, headed by Saudi Arabia and the UAE, increase their financing pressures on Cairo, which is in dire need of foreign exchange to pay its obligations to foreign creditors and provide dollars for importers, as Egypt relies on 40 per cent of its demand for goods from abroad, which caused a shock to the markets. Egypt says it was caused by the Russian war on Ukraine and the withdrawal of hot money in favour of high interest in the United States. At the same time, the fund confirms that the cause of the crisis is the economic policies of the Egyptian regime, including the military establishment’s control of the economy with the help of its military influence in its control of the country. Egypt’s attempts to sell bonds and attract hot money with high interest did not contribute to resolving the crisis.

International monetary fund pressures

Despite the weakness of the financing segments of the Monetary Fund, as each instalment of the loan is estimated at only $347 million, the Monetary Fund’s review of the implementation of the requirements before each instalment date, which takes place in March and September, is essential in the direction of donors from Cairo’s allies, who have repeatedly linked aid and loans to fundamental economic reforms. The IMF is stressing its pressure on the Egyptian government to implement the conditions in a natural way before the due date for the instalment, so the Director of the International Monetary Fund, Kristalina Georgieva, said last Thursday that Egypt must adjust the pace of implementing the long-term national projects that it intends to carry it out in light of the economic crisis if the rapid pace of its implementation continues.

As for the Middle East official at the International Monetary Fund, Jihad Azour, he confirmed that Egypt and the Fund did not reach an agreement on the date for the following review, which was supposed to be last March. That means more pressure, especially in the file of strengthening the role of the private sector by removing the army and its companies. It is still being determined whether the pressures of the International Monetary Fund on Egypt with the late payment will be sufficient to push the Egyptian government to implement, even partially, the agreed terms.

The anvil of army leaders

According to previous reports of the Africa Intelligence website, which is close to French intelligence, one of the major allies of the Sisi regime, the conditions of the International Monetary Fund put Sisi in a significant dilemma between his military leadership and the financial crisis that requires concessions to obtain loans. The site said there is great discontent among the army leaders and dissatisfaction with the impact of the pressures of the UAE President, Mohammed bin Zayed, on Sisi and Sisi’s flexibility in accepting the conditions. The site said in a report that 6 Egyptian army and intelligence leaders submitted their resignations due to their fears of the effects of the economic crisis on the popular level, which made them expect the possibility of removing Sisi and preserving the country.

In a subsequent report, the site also discussed the military leaders’ concern about bin Zayed’s influence on Sisi, especially about army projects and state assets. It coincided with widespread calls to protest against the regime and demand the removal of Sisi last November, which ended before it began using the violent security grip. Abdel-Fattah El-Sisi walks the rope between the conditions of the IMF and the country’s need for loans and between the army leaders, whom he fears, as may overthrow him when he approaches their interests.