[Salon] Sisi’s Quicksand



Sisi’s Quicksand

Summary: although Egypt's Prime Minister has declared the economic crisis over due to a strengthening currency and a narrowed balance of payments deficit, this superficial recovery is fragile, driven by external factors, and is being exploited to deepen the military's catastrophic grip on the economy.

We thank our regular contributor Maged Mandour for today’s newsletter. Maged is a political analyst who also contributes to Middle East Eye and Open Democracy. He is a writer for Sada, the Carnegie Endowment online journal and the author of the recently published and highly recommended Egypt under El-Sisi (I.B.Tauris) which examines social and political developments since the coup of 2013. You can find Maged’s most recent AD podcast here.

On the 29th of July the Egyptian Prime Minister Mostafa Madbouly announced that the economic crisis was over, and called for a reduction in commodity prices. Ignoring the fact that prices do not respond to commands from politicians, what the Prime Minister seems to be ignoring is that the dependencies the regime has built over the past decade will make any partial recovery not only temporary, but will lead to a deepening of the country’s economic dysfunction. There are, indeed, signs of a mild recovery. However, they are signs of the peripheral and dependent nature of the Egyptian economy from a global perspective, rather than signs of a genuine transformation. The most obvious example of this is the notable rallying of the Egyptian pound which has appreciated against the dollar by about 6% since April. There is an improvement in the current account, which narrowed from USD 17.1 billion to USD 13.2 billion for the first 9 months of the year, amid a surge in exports, remittances and tourism revenues.

This is, however, a rather simplistic reading of these figures. A deeper look reveals that the recovery is limited, fragile and, more importantly, is entrenching the military’s grip on the economy. For example, if one looks at the appreciation of the pound one can see that it comes from international developments more than from the regime’s reform efforts. Firstly, there is the general weakening of the dollar due to Trump’s erratic trade policies, combined with an expected cut in interest rates by the Fed in September. This was coupled with a shift by institutional investors away from the US, which makes countries like Egypt much more attractive considering that Egypt offers one of the highest real interest rates in the world as of July 2025. This has led to mass influx of hot money and a borrowing bonanza which has seen the regime borrow a third of its annual requirements in a single month. In July, the regime announced it was planning to issue USD 4 billion in bonds over the next 12 months to narrow the financing gap. Hence, the regime is doing what it did in the past, borrowing quickly by offering extremely high interest rates.

A cursory look at public finances, however, reveals a dire situation. For example, the projected cost of servicing external debt increased by USD 1.34 billion to reach USD 25.97 billion. This is combined with an IMF forecast that expects the total external debt to reach USD 202 billion by 2030, increasing from a projected USD 162.7 billion by June 2025. This is a massive burden on a state budget that is already consumed by debt. For example, at the end of the fiscal year 2025 ending in June 79% of state revenue was consumed by debt servicing, while the deficit increased by 53.1% to reach USD 26 billion (EGP 1.26 trillion), also driven by debt servicing. These are catastrophic figures.


Locals in Arish in northeastern Egypt have been protesting against demolition work by Abu Dhabi Ports Group which has acquired the rights to develop and operate a logistics zone near the northern entrance of the Suez Canal [photo credit: Sinai Foundation for Human Rights]

The second sign of improvement is the narrowing of the current account deficit, which is usually a sign of improved international competitiveness. A historic look, however, reveals that this is not a real improvement compared to the last decade. For example, in 2022 the year of the crisis the deficit reached USD -10.54 billion, while in 2023 the deficit reached USD -12.56 billion. Hence the narrowing of the deficit is positive, however, it is far from being the transformation that the economy needs to move away from a chronic deficit that has plagued Egypt since 2008.

The underlying dynamic, however, is the regime’s insistence on a model of militarised state capture that has proven to be catastrophic. For example, there is the new mega project, Jirian City, with an estimated budget of USD 20 billion. This project will be executed by a strategic alliance between Future of Egypt and prominent real estate developers Palm Hills, Mountain View, and Nations of Sky. The Future of Egypt is the development arm of the air force that is already responsible for a massive land reclamation project called the New Delta Project, which targets the cultivation of 2.2 million feddans, while Nations of Sky appears to be a joint venture between the Future of Egypt and an unidentified sovereign entity. The estimated size of the new city is 1600 feddans, with a 9km artificial canal to be built varying in width from 50 to 240 meters, with planned luxury housing developments overlooking the canal. This will not only be very expensive to construct and maintain, with 12 large water pumps needed to fill the canal, but it will also consume around 10 million cubic meters of water out of a total of 55 million cubic meters coming from the Nile. This will worsen an already dire water crisis in the old Delta. It is an Orwellian scenario of drought for the poor, while repeating the same logic of white elephant projects with no clear return.

There is also evidence of an emerging trend in which the civilian public sector is cannibalised by the military economy. For example, there is the transfer of 89% of the shares of the publicly traded and government owned Arab Company For Land Reclamation to the Future of Egypt at 5% of its market value. There is also the case of the Helwan steel factory that was marked for liquidation in January 2021, a national monument from the Nasser era. As part of the liquidation, it appears that a company called Multi Trade, owned by the General Intelligence Service, acquired a number of assets belonging to the factory at the lower end of their price evaluations through a non-competitive bidding process leading to an estimated loss to the public purse of USD 25 million (EGP 1.2 billion).

Hence, despite a modest recovery primarily driven by external factors, the situation remains dire. The underlying dynamic is that any recovery will be immediately devoured by the military and its insatiable desire for economic resources. This makes the prospect of an improvement in living standards for the mass of ordinary Egyptians remote to say the least. Put simply, as long as the hyper militarisation of the economy and the state continues, the prospect of an end to the crisis will remain remote and any reprieve will only deepen the crisis down the line.

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