We are concerned about the dire regional situation. Despite Egypt’s current political and security stability, academics and public affairs analysts are most concerned about its economic situation.
Unstable economic conditions are the most vulnerable and harmful component of Egypt’s stable system. It is the variable that has the capacity to tilt the scales in favor of stability or pose a social or political risk.
Despite the government’s and the economic group’s numerous reform efforts, the state continues to conduct reforms through short-term decisions rather than making significant changes to economic policy.
What is genuinely worrying is that the solutions are known and debated, but they have yet to be implemented or addressed with the rush that their consequences for Egypt’s stability require.
We continue to prioritize financial and monetary policy above true economic transformation. The International Monetary Fund (IMF) maintains persistent pressure, while decision-makers feel that attaining temporary good results in these two areas constitutes success. This ignores the serious social repercussions of focusing on monetary and fiscal policies without examining how they affect citizens’ lives.
Here’s my question: Will the state continue to prioritize exchange rate policy in its next phase, or will it put controlling prices – which have spiraled out of control and transformed basic goods into luxuries for vast sectors of the citizens – its main priority?
In essence, what is happening in Egypt is not exchange rate liberalization or adjustment, but rather currency depreciation, which has a wide range of negative consequences for all sectors of society. This has turned residents’ lives into a continual sequence of hardships, compelling them to forego numerous basic requirements. This predicament has also generated resentment and dissatisfaction with the government’s economic policies, with no glimmer of hope for measures to stop the continual price increases caused by the currency’s fast devaluation.
In just eight years, the exchange rate jumped from 8.88 EGP per USD to more than 50 EGP, causing an extraordinary deterioration in all facets of the Egyptian economy. Meanwhile, no serious economic strategies have been established to carry out significant changes, limit the negative consequences, or stem the bleeding caused by the devaluation’s effects on every aspect of life.
We have yet to see a complete economic policy focused primarily on production and employment, as well as measures to actually boost exports through tangible steps and announced targets.
Furthermore, more than 70% of the Egyptian economy operates outside of the formal sector, ignoring the standards and agreements. This has resulted in unmanageable instability and a systematic deterioration of the formal economy, which is loaded with several tasks and unable to compete under the enormous pressure placed by numerous governmental agencies.
Even as I write this essay, there is no unified state budget. Certain institutions and agencies insist on functioning outside of the official state budget, creating a risky scenario that inflates budget deficit estimates. In the lack of comprehensive revenue accounting, financial policymakers are forced to levy more taxes and levies on individuals and companies in order to reduce the deficit and put it within IMF allowed limits. This increases the demand on individual and institutional resources, lowering overall quality of life.
The state continues to pursue an expansionary policy in terms of spending on national projects that it believes are critical to achieving future investment returns. Whether we agree or disagree with the state’s role in implementing these projects, we now confront a new reality that necessitates measures to lessen the burden of project spending and shift funds towards delivering additional services to individuals who are adversely affected by economic constraints.
There is an urgent need to allocate greater amounts of the budget to health and education services, particularly at this critical moment, in order to alleviate individual financial concerns and promote public morale.
Implementing genuine economic reform initiatives is no longer an option. Again, I underscore the importance of forming an economic advisory council under the direction of the president. This council should have diversified experience in economics, finance, and monetary policy, as well as the ability to develop long-term economic policies and monitor their execution within a fixed timeframe.
The future phase cannot be constructed on short-term, non-sustainable solutions. The magnitude of political and security pressures that the country will face as part of efforts to redraw the Middle East map is undeniable, not only because of the brutal actions and humanitarian violations in Gaza, Lebanon, and Syria, but also because of the brazen statements of Israeli Prime Minister Netanyahu and numerous extremist Zionist figures around the world.
The combination of these forces, together with the economic condition, necessitates immediate action to lessen social economic obligations and restore a self-sustaining economy. This need cannot be delayed or underestimated any longer.
Next month, President-elect Donald Trump will begin his term. From my opinion, we must develop agreed-upon economic policies aimed at reducing burdens rather than imposing new duties and constraints. Social and security stability are far more important than satisfying foreign organisations and creditors. To revise the terms of the IMF deal, we must immediately organise a professional negotiation committee made up of famous Egyptian specialists in finance, law, and banking. This is critical to maintaining state stability, avoiding hasty actions that harm the economy in the medium and long run, and preventing short-term civil turmoil.
It is critical to note that the IMF’s programs have never emphasised accomplishing meaningful economic transformation. Instead, they prioritize fiscal and monetary reforms, which may not represent healthy economic conditions or living standards that promote citizen stability. Their primary goal is to secure debt repayments, regardless of other factors.
The current worsening conditions are the result of prioritizing IMF dictates above actual economic improvements. The IMF’s persistent economic pressure has resulted in an extraordinary depreciation of the Egyptian pound, decreasing its value much below its genuine worth.
Furthermore, IMF pressures have driven inflation to skyrocket to heights not seen in over 50 years, topping 41 per cent in June 2023 before falling to 23.7 per cent after reform measures – a still significant figure. The IMF plan also imposed successive rises in energy prices, which fueled inflation and raised the expense of essential services for the poor. Furthermore, subsidy reduction resulted in price increases of more than 100 per cent for medications and several necessary commodities.
The IMF’s push to combat inflation through substantial interest rate hikes – surpassing levels conducive to investment and job creation – has particularly impacted small and medium-sized enterprises. Thousands of these enterprises have either ceased operations totally or are on the verge of bankruptcy.
Per capita GDP in dollar terms has also recorded its worst levels, dropping from $4,563 in the 2022 fiscal year to $3,727 in 2023, with projections for a further decline to $1,700 in the 2023/2024 fiscal year.
IMF demands have resulted in the sale of undervalued public assets, hasty decisions with poor long-term implications, and an increased risk of instability. As a result, the Egyptian government must prioritise renegotiating the deal conditions over satisfying IMF demands or meeting review requirements.
A historical analysis of the IMF demonstrates its critical involvement in violent civil conflicts and divides. For example, the $150 million IMF loan to Somalia in 1980, along with subsequent reform suggestions, resulted in the full collapse of Somalia’s economy and plunged Mogadishu into a protracted, horrific civil war. More than 42 years later, Somalia remains impoverished.
Similarly, Sudan’s $260 million IMF loan for structural reforms in 1982 produced tremendous economic devastation, eventually resulting in the country losing its southern part owing to internal divides caused by economic collapse and civil turmoil.
Other countries, including Mexico, Argentina, Tanzania, Lebanon, and Tunisia, have also endured disastrous IMF-led reforms, resulting in irreversible collapses.
Finally, I hope our measures anticipate any attempts to undermine the country’s security and stability. Instead of deferring to the interests of others, we must tackle the challenges with answers customised to our specific requirements.
I am certain that all individuals in charge of Egypt’s economy during this vital juncture emphasise stability, reform, and safe navigation through these dangerous times in the Middle East.
