A Lebanon-like scenario for Egypt?
Egypt’s contemporary economic model is marked by the unprecedented enormity of its expenditure in comparison with its resources and revenues, and this has been the case since the accession to power of President Abdel Fattah al-Sisi. He and his government act, in fact, as if Egypt enjoyed the same kind of petrol or gas income as the ‘Petromonarchies’, or as if the country was a giant of industry and export like China. However, Egypt can alas not claim to be one or the other since its trade deficit is in the order of 45 billion dollars per year. Under the urges of Sisi, Egypt nevertheless behaves like a beggar but with a ferocious appetite, while also putting intense pressure on its own citizens by reducing social aide, a tax system that punishes the worst-off, and an increase in the cost of what can no longer acceptably be called “public services”, at a time when 30 million Egyptians are currently living on 3 dollars a day. And as a reminder, the country’s per capita GDP is 140th out of 213.
Now, from atop its debt that has quadrupled in 10 years and now counts 375 billion dollars, Egypt’s survival depends entirely on foreign funding, and paying off just the interest on its debts to national and international creditors takes up more than a third of its annual budget. However, Egypt is largely dependent on foreign nations to meet the basic agricultural needs of its population, importing more wheat than any other country in the world and producing only a third of what its citizens eat. At the same time, the luxurious tastes and extreme opulence of its president are dragging the country into a new administrative capital in the desert around Cairo that has cost nearly 60 billion dollars, into a 25 billion dollar nuclear reactor for a country that has a surplus of electricity, into 8 billion dollars of works to increase the capacity of the Suez Canal despite the fact that its income has been stagnant there for several years, and finally into a bulimia of weapons acquisitions that have made the country the fifth biggest buyer in the world in this sector.
Is Egypt – with foreign investment being cut in half over the last 40 years – condemned to wither away in a Lebanon-like catastrophe, being – just like Lebanon – dependent on “fresh” dollars coming in to nourish its population ? Let us cast our minds back to the Lebanese Ponzi scheme that worked and kept the illusion going while being funded by the Saudis, and also to the infamous “financial engineering” undertaken by the Lebanese central bank to doctor its accounts: all that appears to now be inspiring Egypt’s monetary authorities. Their inventiveness today allows the Egyptian government to declare only half of its debt, with the rest owed being spread across the central bank and public businesses. It’s simple: the country is the second biggest debtor to the IMF after Argentina, fresh in the knowledge that is also in enormous debt to the World Bank, the African Development Bank and even to Germany.
There is, however, a fundamental difference between Lebanon and Egypt in that the latter holds a vital strategic importance for the USA, for Russia, but also and increasingly so for China. President al-Sisi is indeed masterfully exploiting these geopolitical attributes by showing great regional diplomatic proactivity and buying weapons from everyone in order to look good, and even threatening Europe with releasing 6 million refugees upon it that the country shelters. With its 6.5 million inhabitants, we may note, Lebanon is not a heavyweight when compared with a nation like Egypt that has more than 100 million. If Lebanon were to go bankrupt it would not be comparable to the consequences – for the region and for the world – if Egypt were to collapse, a country that is considered with good reason to be “too big to fail”.
For readers who would like to refine their understanding with the very exhaustive article written by Robert Springborg on this subject, I advise you to read :
May i direct you as well to the link for Project on Middle East Democracy whose cause is just and worthy of respect:
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