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.
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