Military generals have become multi-millionaires thanks to corruption in Sisi's mega projects [photo credit: Steve Hanke]
With the ascension
of Sisi to the presidency, on a wave of mass popular support, the full
militarisation of the state and the political system was set loose. For
example, the Mubarak era policy
of populating the state apparatus with retired or active military
personnel accelerated with the state bureaucracy, economic authorities,
ministries and local government all heavily populated
by retired or active members of the Egyptian Armed Forces. This was
coupled with legal and constitutional amendments that heavily curtailed
the power of the judiciary, severely weakening
the ability of the State Council and the Constitutional court to
challenge the executive. Finally, a new parliamentary majority party was
engineered
by the security services; it does not seem to play an active role in
policy making nor does it populate any important government posts. It
rather acts to rubber stamp the government's policy and to provide an
aura of legitimacy for the regime. This heavily militarised political
landscape has allowed the military and the Presidency to embark on a mass appropriation of public funds, through an historic debt spree,
whose burden has fallen on the shoulders of the poor and the middle
classes. The list of examples are too numerous to survey, but the most
prominent example is the New Administrative Capital, with a total
estimated budget of US$300 billion. In spite of official government pronouncements that the capital is not being funded by the state budget, implying that it is not a burden on public finances, there is mounting evidence
that it is, indeed, funded by loans and public money drawn from the
budget of economic authorities. The reason that it does not appear on
the state budget is the fragmented nature of the Egyptian budgetary
landscape which allows the regime to obfuscate and obscure its spending.
This is only possible within the confines of a fully militarised
political system, and with a parliament that is too docile to challenge
the supremacy of the executive. It is important to note that the project
is executed by the Administrative Capital For Urban Development (ACUD); 51% of the company is owned by the military.
Even with the recent mass capital inflows, namely the US$35 billion Ras El Hekma UAE investment, the increased value of the IMF loan to US$8 billion, the return of hot money, and the EU funding package estimated at US$8.1 billion,
a trend that further impoverishes the vast majority of Egyptians is set
to continue though it is expected to alleviate the worst symptoms of
the debt crisis. Still, the regime’s policy of mega projects with
dubious economic returns seems to be very resistant to change. For
example, in January 2024, ACUD announced plans to start the second phase
of the New Administrative Capital with an estimated cost of 250-300
billion EGP, doubling its size. There are also talk of another mega project for the Suez Canal with an expected cost hovering around the US$10 billion mark. That's in spite of the amount being transferred
to the state budget from the revenues of the Canal dropping from US$4.5
billion in 2014/15 to US$3.8 billion in 2021/22, raising questions
about the efficacy of a project like this. And since Yemen's Huthis
began their attacks on Red Sea shipping, revenues have declined ever more precipitously.
Capital inflows for Sisi's mega projects will only benefit the military elites and the regime’s creditors, now enjoying record high interest rates. The interest rates are so lucrative that an estimated US$16 billion
of capital investments in short term debt instruments have flowed into
the country since early March. It is important to remember that an outflow of US$20 billion
worth of investments in the same type of debt instruments triggered the
crisis in 2022, illustrating how little the regime has learned over the
past two years. In the end, the debt spree which has cost Egyptians US$132.7 billion
in external debt servicing over the past decade has not only
impoverished them but has allowed the military to entrench itself in the
economy.
The core of Egypt's problem does not solely lie in economic policy
but with the political system, an outright military autocracy, that
produced this policy and an international consensus that has encouraged
it. With the role of the EU and the US in enabling one of the most
brutal dictatorships in the Middle East, the inevitable anti-Western
popular backlash will be immense and generational. The European
obsession with migrants will pale in comparison with the hostile regime
that might emerge in the Southern Mediterranean if and when the Sisi
regime changes.