Global Economic News Digest

How Abdel Fattah al-Sisi Ruined Egypt's Economy

06 sep 2023
author: Steven A. Cook
source: Foreign Policy


The coup leader-turned-president promised Egyptians prosperity, but the country is flat broke.

Throughout much of the summer of 2013, Egypt was in the grips of what could be described as “Sisi-mania.” Songs, sandwiches, music videos, poems, and even pajamas paid tribute to Abdel Fattah al-Sisi, the military officer who’d just overthrown President Mohamed Morsi.

From the outside, it was a bizarre spectacle as millions of Egyptians rejoiced at the military’s ruthless and brutal intervention against the Muslim Brotherhood apparatchik who’d only become president a year before, in June 2012. Even so-called revolutionaries and longtime critics of Egypt’s authoritarian political system seemed to genuinely adore the diminutive military leader who promised them a fresh start after a tumultuous 18 months beginning with the uprising against longtime leader Hosni Mubarak in late January 2011.

With Morsi jailed and members of the Muslim Brotherhood dead, arrested, or on the run, Sisi promised Egyptians better days, though he warned his fellow citizens to be patient. That was wise. Egypt’s complex economic, social, and political problems had only deepened as Egypt lurched from one crisis to another throughout the fraught and short-lived democratic transition. Yet a decade later, Sisi has not rewarded Egyptians for their patience. Quite the opposite: The man who was supposed to have rescued Egypt is now overseeing its ruin.

Sisi promised Egyptians prosperity, but Egypt is flat broke. The statistics are staggering. Inflation is running at almost 37 percent and a single U.S. dollar fetches 30 Egyptian pounds. (It was about 7 pounds to the dollar when Sisi came to power.) The country’s international debt is almost $163 billion, and its overall debt is projected to reach nearly 93 percent of the country’s GDP in 2023. Government officials have been forced to manage Egypt’s finances like a shell game, moving money around in a vain attempt to hide the country’s precarious economic conditions.

Sisi has been making the case that the country’s economic tribulations are the result of issues beyond his control, especially the COVID-19 pandemic and Russia’s invasion of Ukraine. Those crises have no doubt created significant economic challenges that countries—the United States included—have had difficulty managing. Yet Sisi’s protestations are clearly a discursive strategy to downplay his own culpability in the further pauperization of Egypt.

The president has gone on a debt-fueled spending spree on mega-projects for which there are few economic justifications. The mightiest and most obscene of them is the New Administrative Capital, which is just in its first phase and so far has cost over $45 billion. When the United Arab Emirates and China pulled out of the project, Egyptians were forced to foot the bill by adding massive amounts of debt to the country’s balance sheet.

In addition to building a new capital lock, stock, and barrel in the middle of the desert, Sisi is overseeing a bevy of other large projects. Notable among them is a new “summer capital” on the north coast, a nuclear power plant (in a country with excess electricity), a sustainable city in the Nile delta, and the revival of a failed Mubarak-era mega-project in upper Egypt called Toshka. This comes after the opening of a Suez Canal bypass—billed as the “New Suez Canal”—in 2015.

Most of these projects are of dubious economic value but are (or were) politically important. They were meant to be tangible demonstrations of Egypt’s rebirth under the steady hand of its new military officer-turned-president and his colleagues at the Ministry of Defense. The message may have been that Egypt can still do great things, but these mega-projects have become unsustainable economic burdens on the country.

Officials point out that many Egyptians were employed in the construction of these projects. Fair enough—but at what cost? Governments have a responsibility to build infrastructure, but the long-term benefits must outweigh the short-term costs. New bridges, roads, interchanges, airport upgrades, and subways are well worth it—and Egypt has done some of this—because of the return on these projects in terms of greater and more efficient economic activity. The Suez Canal bypass may fit into this category, but the summer capital and the New Administrative Capital are enormous pits of money that Egypt does not have.

It is hard to fathom that within a decade, Sisi—whose patrons in Saudi Arabia and the United Arab Emirates refloated the Egyptian economy with direct cash transfers, who secured International Monetary Fund (IMF) loans on easy terms, and who enjoyed significant goodwill among Western governments—took a poor country and made it poorer.

In its most recent agreement with the IMF, the Egyptian government agreed to sell off state assets, including those that the military owns. Yet there have been few buyers, because these assets are either not worth anything, no one knows how to assign them a value, or potential buyers are sitting on the sidelines waiting for another devaluation of the Egyptian pound (which would be its fourth since March 2022) so they can get whatever quality firms there are at even cheaper prices. Recently, the government announced $1.9 billion in sales of state assets, which is positive but does little to relieve widespread economic suffering. Egyptians rose up in 2011 because they wanted dignity. A fire sale of state-owned assets is hardly dignified.

Rather than continuing to wait for the prosperity their leaders promised, Egyptians are leaving in increasing numbers. Lost in much of the reporting on the sinking of the overloaded fishing boat off the coast of Greece in June was the fact that there may have been 300 to 350 Egyptians aboard. And though the number of Egyptians migrating to Europe by boat increased after the January 2011 uprising, it has risen further in recent years. Through June, more than 6,000 Egyptians have tried to make it to Italy by sea since the start of 2023. They constitute the second largest group of migrants hoping to make it to Italian shores. In 2022, about 22,000 Egyptians sought a better life across the Mediterranean. Of course, it makes sense that larger numbers of Egyptians would be leaving given the dire economic circumstances they confront.

Egypt’s economic travails only reinforce the idea that the country is a spent force. In the 1970s, President Anwar el-Sadat sold U.S. Secretary of State Henry Kissinger a story about how Egypt was an influential player that could help secure regional peace and be the linchpin in an anti-Soviet regional order. Sadat (consistent with both his character and political career) was exaggerating. Egypt is an important U.S. partner. Yet with few exceptions—such as Operation Desert Shield/Desert Storm—it never had the resources to play the role U.S. policymakers had hoped it would when Cairo reoriented its foreign policy toward the United States.

And although Sisi is in the room for important meetings such as the recently concluded Russia-Africa summit in St. Petersburg or last summer’s GCC+3 meeting with U.S. President Joe Biden, it seems the Egyptian leader’s attendance is pro forma. Being in the room confers a certain amount of influence, but Egypt is more an observer at these gatherings than a player.

The most glaring example of Egypt’s descent and concomitant, hollow foreign policy is Cairo’s almost total absence in the civil war in Sudan—the country’s own backyard. In the opening phase of the conflict, Gen. Mohamed Hamdan Dagalo’s Rapid Support Forces held nearly 200 Egyptian soldiers and airmen—who were in Sudan to conduct exercises with the Sudanese army—hostage. They were released relatively quickly with the help of the Emirati diplomats.

After that humiliating episode, the Egyptians have stood on the sidelines and watched the Saudis play an important role evacuating third-country nationals from Sudan. Sisi then ceded any effort to mediate in Sudan to Crown Prince Mohammed bin Salman (with help from Americans). But some in Cairo must be embarrassed that Saudi Arabia has ended up playing the critical role in a conflict where Egypt—according to its own myths—should be leading. Indeed, when Cairo hosted a conference of Sudan’s seven neighbors in mid-July to urge a cease-fire, even that didn’t go well. It was little more than a talkfest and photo-op—and during his remarks at the conclave, Ethiopian leader Abiy Ahmed thanked Saudi Arabia for its mediation efforts.

Recently, an astute Egypt analyst tweeted, “I can honestly say I no longer see a way out from this.” By “this,” I suspect she meant the ruin that Sisi has made of Egypt. A decade or so after Egyptians rose up demanding bread, freedom, and social justice, they have none of those things.