Analysis |

Egypt Praised for Economic Reforms, but Millions of Egyptians Barely Survive

While IMF dishes out compliments, more than a third of Egypt's population lives on less than $2 a day

A photo of Dr. Zvi Bar'el.
Zvi Bar'el
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A vendor at a bread stand in Cairo, Egypt, February 14, 2017.
A vendor at a bread stand in Cairo, Egypt, February 14, 2017.Credit: Nariman El-Mofty/AP
A photo of Dr. Zvi Bar'el.
Zvi Bar'el

It’s been many years since Egypt got so many compliments on the management of its economy. An executive summary published by the International Monetary Fund at the end of July leaves no room for doubt – Egypt is en route to improving its economy.

Egypt has successfully completed the three-year arrangement under the Extended Fund Facility and achieved its main objectives. The macroeconomic situation has improved markedly since 2016, supported by the authorities’ strong ownership of their reform program and decisive upfront policy actions,” the report says.

The report, which was written in advance of the last payment of the $12 billion loan that Egypt received from the IMF in 2016, particularly stresses the lowering of inflation from 30 percent to 14 percent, the reduction in unemployment, a reduction in the public debt to GDP ratio and the need to “keep public debt on a downward trajectory.” The elimination of most fuel subsidies, which passed with almost no public protest, the growth in foreign currency balances, and more effective tax collection along with giant projects like the new administrative capital being built near Cairo have boosted state revenues significantly.

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But like with every such report, it must be read not only to see the sunny side of the Egyptian economy, but also its gloomier aspects.

People stand in line to cast their vote during the referendum on draft constitutional amendments, Cairo, Egypt, April 20, 2019.Credit: Stringer/Reuters

According to a report by the government’s statistical agency, 32 percent of Egypt’s 99 million people live at the poverty line, and 6.2 percent live in extreme poverty. The definition of the poverty line is income of less than $2 a day per person, and extreme poverty is defined as a dollar a day. Poverty figures indicate that the percentage of poor people has doubled since 2000, and has climbed 5 percent since 2015.

According to an analysis by Egyptian economists, the increase in poverty is not only due to price increases since the reforms began, but mainly due to the movement of the Egyptian pound against the dollar, which more than doubled the value of the dollar and thus the price of imported goods in Egyptian pounds. This dramatic fluctuation caused the Egyptians’ purchasing power to diminish sharply, while salaries – even after the compensation that was paid mainly to civil servants – not only failed to keep up with inflation, but were eroded by 20 percent.

This income depreciation was particularly hard on middle class families, some of which found themselves skirting the poverty line. A recent article on Lebanon’s Raseef 22 website described Egypt as a “sad nation,” mainly because of people’s economic situation.

It’s hard to learn about the economic pressure from government media outlets, which are subject to scrutiny and censorship. But the average Egyptian does not need the newspapers to learn about his situation. He feels it every day when he queues in front of the government bakeries that sell pitas at a discount, or when he pays a lot more Egyptian pounds to fill his gas tank. “Falafel costs 3 pounds and koshari [street food made from macaroni batter] costs 10 pounds. A person who wants to eat this basic food has to spend 22 pounds a day,” one Twitter user wrote. “How can you live like this?”

There is difficulty developing the private sector because the military controls a significant number of projects and it doesn’t let private companies compete fairly for market share in the manufacturing or construction sectors. While privatization is a key element of the economic reform program, its implementation is sluggish – either because the military is unwilling to give up the companies it owns, or because of the fear that privatization will make large blocs of workers redundant, leaving them to join the millions of other jobseekers.

Egyptian President Abdel-Fattah al-Sissi attends an emergency summit of Gulf Arab leaders in Mecca, Saudi Arabia, May 30, 2019.Credit: Amr Nabil/AP

Since much of Egyptian GDP depends on domestic consumption, and given consumers’ shrinking income and purchasing power, it is hard to believe Egypt will realize its 8 percent growth target, and the conservative forecast of 5.5 percent next year is also doubtful.

Egyptian President Abdel-Fattah al-Sissi is calling on his citizens to be patient, saying the light is just around the corner and the failures of previous regimes cannot be corrected in a day. But he has been in power for six years and the public’s patience is running out.

His regime is considered stable, parliament is under his control, the army is with him, the United States and Saudi Arabia support him and gas production in the Mediterranean assures him of economic backing. But the regime of Hosni Mubarak was similarly stable before the Arab Spring flooded Egypt with boiling lava.

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