Egypt on the Eve of El-Sisi's New Presidential Term

On December 10–12, 2023, presidential elections were held in the Arab Republic of Egypt (ARE). As a result of a referendum held in 2019, certain amendments were added to the constitution, including the partial elimination of presidential term limits, thus allowing incumbent President Abdel Fattah el-Sisi to run again for the post once again.

The president's powers would have lasted until March of this year, however, the leader of Egypt decided to hold early elections, possibly due to the country’s deteriorating economic situation.

Over the last decade, Egypt has gained some ground in economic development. The country's GDP growth has been relatively steady in recent years, although there has been some slowdown in the years of political instability (2011–2012) and during the COVID-19 pandemic (2020–2021). While in 2010 GDP grew by 5.1% and only 2.2% in 2012, the figure for 2022 was 6.6%.

As a part of Vision 2030, Egypt is actively developing a green economy and has already become one of the Middle East and North Africa leaders in green development. During the last decade, Egypt has built new wind and solar power plants (the largest complex is located in Benban). In addition, a large “green hydrogen” production facility was built in Ain Sokhna.

Egypt's economic policy of the last decade has peculiar features. The country's leadership has placed a bet on industrial and infrastructural megaprojects. In particular, Egypt has upgraded the Suez Canal’s infrastructure. Its traffic capacity increased significantly after the construction of an additional canal bed in 2015.

The megaprojects contributed to a slight decrease in unemployment. In 2010 it was 8.8%, and in 2012 the rate increased to 12.6%. Although the unemployment rate remains relatively high, especially among the youth, starting from 2013, it has been observed to decrease to 7.4% by 2021.

Among other things, loans and direct assistance from international donors made the number of projects possible. Over the past decade, Egypt has repeatedly received loans from the International Monetary Fund (IMF). In addition, China and Russia have provided Cairo with loans while the Arab monarchies and the EU countries have granted direct financial assistance. Foreign investors have also played an important role in financing projects. Foreign direct investment declined in 2011 in the wake of the Arab Spring, then increased until 2019, and after that, some new decline followed. In 2022 foreign direct investment exceeded $11 billion, the highest level in recent years.

However, despite certain successes in economic development, Egypt continues to face some challenges. One of the pressing problems remains the high inflation rate. In 2010, it stood at 11.3%; in 2012 inflation fell to 7.1%. Between 2012 and 2017 there was an increase in inflation, peaking at 29.5% after which there was some decline. In 2022, inflation was 13.9% and in 2023 its growth accelerated, with the value of the indicator reaching 39.7% in annualized terms in August 2023.

Egypt's economic problems have been exacerbated by a significant population upsurge over the past ten years. This trend has been observed over the past few decades. In 2010, before the Arab Spring, the country's population was 87 million; in 2012, it had already reached 91 million. In 2022, the number of Egyptians reached 110 million, and it continues to grow, with opportunities for agricultural development being very limited. These days, Egypt remains the largest importer of wheat in the world. This creates additional challenges in ensuring food security in Egypt.

To date, Egypt still experiences high inflation, heavy external debt, and a negative trade balance. The current economic dynamics are likely to continue in the foreseeable future since a solution to the fundamental problems of the Egyptian economy has not been found yet.

On December 10–12, 2023, presidential elections were held in the Arab Republic of Egypt (ARE). As a result of a referendum held in 2019, certain amendments were added to the constitution, including the partial elimination of presidential term limits, thus allowing incumbent President Abdel Fattah el-Sisi to run again for the post once again.

The president's powers would have lasted until March of this year, however, the leader of Egypt decided to hold early elections, possibly due to the country’s deteriorating economic situation.

In addition to el-Sisi, the National Elections Authority has approved three other presidential candidates, including Egyptian Social Democratic Party leader Farid Zahran, head of the Wafd Party Abdel Sanad Yamama, and leader of Republican People's Party Hazem Omar. The strongest opposition politician, Hisham Kassem, was sentenced to six months in prison and was unable to run. Another candidate, Ahmed al-Tantawi, failed to collect the required number of signatures to be registered.

There was no doubt that President el-Sisi, who has been in office since 2013, would win the elections. At that point in time ten years ago Egypt was on the verge of a civil war. In 2013, Egyptian society was divided between the Muslim Brotherhood*, led by Egyptian President Mohammed Morsi, and secular forces. The situation was extremely dangerous, as an Islamist win could have resulted in a confrontation between the parties. However, the army stepped in at the most crucial moment: in late June and early July 2013, defense minister Abdel Fattah el-Sisi staged a military coup.

Adly Mansour, president of Egypt’s Supreme Constitutional Court, became the interim president. Then, in June 2014, el-Sisi was elected as president of Egypt. He has since been in power for over ten years. This anniversary, as well as past elections, serves as an excellent occasion to summarize how Egypt has changed over the past decade.

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The Current Internal Political Situation

According to a well-known Russian orientalist, Egypt returned “to approximately the same version of authoritarianism that existed before February 2011” in 2013. After the restoration of military power in Egypt, harsh policies towards the Muslim Brotherhood* intensified. In the first year that followed the “June 30 Revolution”, 41,000 people were sentenced, and the majority of them were members of this organization. Compared to 2011-2012, freedom of speech in the country has not improved, although it has not changed for the worse. Back in 2010, Egypt ranked 127th in the World Press Freedom Index. However, in 2011-2012, it dropped to 166th place for persecuting journalists, particularly during the 2011 revolution. In 2023, Egypt continued to rank 166th in the index.

In the last decade, the threat of terrorism has also taken on greater importance amid the internal political, social, and economic problems in the country. Several major attacks were committed in the country during this time. In 2015, a Russian passenger plane was brought down by a bomb over the Sinai Peninsula. In 2017, the largest terrorist attack in Egypt's recent history took place at a mosque in Bir al-Abed. Over the past decade, terrorism has remained as one of the key security challenges for the ARE.

Tense Foreign Policy

Egypt’s relations with Turkey and Qatar, which had supported Mohammed Morsi and the Muslim Brotherhood*, deteriorated sharply. Contradictions with Turkey were extremely deepening. In 2013, amid Ankara's criticism of Morsi's arrest as well as the policies of the new Egyptian authorities in general, Egypt recalled its ambassador and then declared its Turkish counterpart a persona non grata. Relations with Turkey continued to be strained regarding Libya in 2019-2020. There Ankara supported the Government of National Accord based in Tripoli and led by Faiz Sarraj, while Egypt supported the Libyan National Army, headed by Khalifa Haftar. Another fault line in growing Egypt-Turkey confrontation was the controversy surrounding gas production in the Eastern Mediterranean. Egypt and Turkey fully restored diplomatic relations only in June 2023.

At the same time, despite sharp political and ideological differences, Egypt and Turkey have maintained pragmatic relations. Ankara and Cairo remained reliable trade and economic partners, which led to an increase in trade turnover by 2022, which exceeded $7 billion.

Relations with Saudi Arabia and the UAE, which immediately supported the 2013 military coup, were different. After the events of summer 2013, the Arab countries of the Persian Gulf provided direct financial assistance to Cairo. Since 2013, according to President el-Sisi, Egypt has received over $100 billion in total from the Arab monarchies. Simultaneously Egypt strengthened diplomatic, military, and political ties with Saudi Arabia and the Emirates. The joint diplomatic blockade of Qatar in 2017-2021 was a vivid manifestation of this political consolidation.

In recent years, Egypt has intensified its economic cooperation with China. Chinese companies contribute to the largest infrastructure and industrial projects in Egypt. Companies from China are actively participating in the construction of the “New Cairo”, the new administrative capital of Egypt. This city will house the government of Egypt. Chinese investors are planning to launch several projects in the economic zone near the Suez Canal, with the total amounting to $8 billion.

During President el-Sisi's term, Russia-Egypt relations have also been strengthened. The El Dabaa nuclear power plant is being built by Russian state corporation Rosatom. The plant is expected to cost about $21 billion. However, as Russia has provided Egypt with a loan for its construction, the project does not place a heavy cost on Egypt. In addition, Egypt plans to open a Russian economic zone in the Suez Canal area, which will also become one of the flagship projects for Russia-Egypt cooperation.

Despite certain foreign policy adjustments, , Washington remains to be an important partner for Cairo; Cairo is still a key U.S. ally in the Middle East and North Africa. The annual military aid of about $1.3 billion that the United States provides to the Arab republic is of great importance to Egypt.

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Generally speaking, apart from the mentioned countries, Egypt’s foreign policy has faced a lot of challenges over the past decade. The civil war in Libya has become a key regional security problem. Libya has become a constant source not only of terrorist threats but also of smuggled weapons to Egypt. The war in Libya has hurt the Egyptian economy since the two countries were developing active economic and investment cooperation before the conflict. Another challenge to Egypt's national security was the construction of the Grand Ethiopian Renaissance Dam (GERD) hydroelectric power station by Ethiopia, the consequences of whose operation are likely to create a significant water shortage for Egypt and Sudan. In 2015, the three countries signed an agreement in Khartoum that dealt with the equitable use of the Nile's water. Even though the acute phase of confrontation surrounding the Ethiopian hydropower plant has somewhat subsided, there is no comprehensive solution to the problem yet.

Economic Development

Over the last decade, Egypt has gained some ground in economic development. The country's GDP growth has been relatively steady in recent years, although there has been some slowdown in the years of political instability (2011–2012) and during the COVID-19 pandemic (2020–2021). While in 2010 GDP grew by 5.1% and only 2.2% in 2012, the figure for 2022 was 6.6%.

The Egyptian government is implementing several national programs to modernize the economy. They are concentrated on Vision 2030, the national development strategy, which has been implemented since 2016. One of its key goals is to increase the quality of life and boost the efficiency of public administration. Under the program’s objectives, Egypt is to modernize the national economy and make it more balanced and competitive. Optimization of the economic management system is expected to have a major impact. If the goals of the Vision 2030 strategy are met, extensive modernization can create a springboard for the country's economy to move towards improved quality and rely more on knowledge, technology, and innovation. As a part of Vision 2030, Egypt is actively developing a green economy and has already become one of the Middle East and North Africa leaders in green development. During the last decade, Egypt has built new wind and solar power plants (the largest complex is located in Benban). In addition, a large “green hydrogen” production facility was built in Ain Sokhna.

Egypt's economic policy of the last decade has peculiar features. The country's leadership has placed a bet on industrial and infrastructural megaprojects. In particular, Egypt has upgraded the Suez Canal’s infrastructure. Its traffic capacity increased significantly after the construction of an additional canal bed in 2015.

The megaprojects contributed to a slight decrease in unemployment. In 2010 it was 8.8%, and in 2012 the rate increased to 12.6%. Although the unemployment rate remains relatively high, especially among the youth, starting from 2013, it has been observed to decrease to 7.4% by 2021.

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Among other things, loans and direct assistance from international donors made the number of projects possible. Over the past decade, Egypt has repeatedly received loans from the International Monetary Fund (IMF). In addition, China and Russia have provided Cairo with loans while the Arab monarchies and the EU countries have granted direct financial assistance. Foreign investors have also played an important role in financing projects. Foreign direct investment declined in 2011 in the wake of the Arab Spring, then increased until 2019, and after that, some new decline followed. In 2022 foreign direct investment exceeded $11 billion, the highest level in recent years.

However, despite certain successes in economic development, Egypt continues to face some challenges. One of the pressing problems remains the high inflation rate. In 2010, it stood at 11.3%; in 2012 inflation fell to 7.1%. Between 2012 and 2017 there was an increase in inflation, peaking at 29.5% after which there was some decline. In 2022, inflation was 13.9% and in 2023 its growth accelerated, with the value of the indicator reaching 39.7% in annualized terms in August 2023. Another important indicator signaling economic problems is the external debt remaining high. In 2010, external debt as a percentage of Gross National Income (GNI) was 17.1%, in 2012 the figure fell to 14.7%, and by 2021 it rose to 36.6%. The Egyptian economy is also under pressure from a negative trade balance. In 2010 imports prevailed over exports by about $12 billion and by more than $22 billion in 2012. In 2022, the difference between imports and exports was over $30 billion.

The steady increase in the number of people living on the poverty line (approximately $560 per year) has also been a manifestation of Egypt's economic problems. In 2010–2011, 25.2% of the country's population lived below the poverty line; in 2012–2013 the figure rose to 26%. In 2019–2020 this number reached 29.7%.

Among the key reasons for chronic problems in Egyptian economy is its high level of regulation and over-organization creating adverse conditions for funding private businesses. Moreover, the Egyptian government pursues an ineffective monetary policy. The liberalization of the national currency exchange rate in 2016 had led to the devaluation of the Egyptian pound which resulted in an increase an inflation and reduced business activity.

In recent years, the Egyptian economy has experienced sporadic declines in production. At the same time demand fluctuations in Egypt are a reflection of processes outside the country, particularly changes in oil prices. Their sharp increase caused a rise in government expenditures including fuel subsidies. The state spent large sums on food and fuel subsidies while money was borrowed from Egyptian banks rather than from external sources, which also worsened the situation.

The Egyptian army's high level of involvement in the economy also poses problems. Even before 2011, the army directly managed dozens of companies engaged in both military and civilian production. When President el-Sisi came to power, the role of companies affiliated with the army only increased. Companies controlled by the military are contractors and subcontractors of major social and transportation infrastructure projects. In addition to the construction industry, the army also plays an important role in the agricultural sector as well as the cement industry. In 2018, a law exempting military companies from civilian audits was passed. This hurts the investment climate as potential investors are not able to get acquainted with the financial statements of the companies. Furthermore, it creates an ideal environment for breeding corruption.

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Egypt's economic problems have been exacerbated by a significant population upsurge over the past ten years. This trend has been observed over the past few decades. In 2010, before the Arab Spring, the country's population was 87 million; in 2012, it had already reached 91 million. In 2022, the number of Egyptians reached 110 million, and it continues to grow, with opportunities for agricultural development being very limited. These days, Egypt remains the largest importer of wheat in the world. This creates additional challenges in ensuring food security in Egypt.

In recent years the Egyptian economy has faced some external challenges that have exacerbated economic problems in the country. In particular, the COVID-19 pandemic has hurt tourism development, leading to a drop in financial income from the Suez Canal and remittances from emigrants. The Ukrainian crisis has also increased the volatility of grain prices and negatively affected Egypt's economy.

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The last decade has seen a certain adjustment in both the political and economic development of Egypt. After President Mohammed Morsi's overthrow, the military seized power and Egypt returned to approximately the same version of authoritarianism that existed in the country prior to the Arab Spring in 2011. There have also been some changes in Egypt’s foreign policy riven by the reaction of some countries, notably Turkey and Qatar, to the June 30 Revolution. At the same time, by 2023, Cairo normalized relations with Ankara and Doha.

Egypt has also achieved some economic success. The government has focused on industrial and infrastructure megaprojects aimed at boosting the national economy. However, the lack of structural economic reforms as well as the ineffective monetary policy are triggering several chronic problems. Problems in the Egyptian economy were aggravated by internal instability in 2011–2013, and as a result of certain global crises. To date, Egypt still experiences high inflation, heavy external debt, and a negative trade balance. The current economic dynamics are likely to continue in the foreseeable future since a solution to the fundamental problems of the Egyptian economy has not been found yet.

* The organization is banned in Russia.