World media attention briefly shone on Egypt while it hosted COP27 in November 2022. Since then, less has been said about the continuing daily struggles facing workers and youth. Falling living standards, failing public services and brutal repression are the prospects for 2023, as throughout 2022.
Egypt’s economy had not recovered from the covid pandemic when the Russia Ukraine war exploded. Around 82% of its wheat was imported from these two countries. The Egyptian pound’s falling value increased the cost of imports. Food and drink prices were up 31% in the year to November. Choosing between pricier bread or higher government spending to keep the subsidised price stable for 70% of the population, the government held the subsidised price – but cut the weight of a loaf from 110 to 90 grams. Workers and the poor are cutting the amount of food they eat and buy for their families and often looking for extra work.
Foreign debt reached record levels of nearly US$158 billion last March. Government debt (already high) increased further, forcing it to look for new loans. The finance minister reported a $16 billion funding gap over the next four years and negotiated with the IMF for a $16billion loan – its fourth since 2016. After six months of negotiations, Egypt only got $3billion. The conditions for a higher sum proved unacceptable.
The IMF demanded a cut to government debt, meaning cuts to food and fuel price subsidies, and a reduction in the military’s role in the economy. It also insisted on further devaluation of the currency, despite being warned by Finance Minister Mohamed Maiet this could cause “significant political hiccups” if it took place before the loan arrived. Nevertheless, the exchange rate with the US dollar has fallen from 15.6 to 24.7 this year, with unofficial rates as low as 33.
The “hiccups” could have risked President Abdel Fattah al-Sisi’s regime facing opposition breaking out in workplaces and on the streets. Senior armed forces officers, who benefit from the military’s business interests, would have opposed it from the opposite direction. Tensions within the ruling class are mostly kept behind the scenes, although last August the governor of the Central Bank of Egypt, Tarek Amer, resigned.
Shifting regional power balance
The gap between the regime’s need to borrow huge sums and the amount the IMF was willing to lend has been partly covered – for now – by loans from Gulf states. Saudi Arabia, Kuwait and the United Arab Emirates extended the terms of their $7.7 billion in total deposits at the central bank.
These regimes fear mass opposition developing in Egypt and setting an example for workers and youth across the Middle East and North Africa, as during the 2011 uprisings. They are sitting on huge pots of money after global oil price increases. But they are also extending their economic and political power across the region – the loans have come with higher interest rates.
Another sign of the increasing power of Gulf states was a meeting between Sisi and Turkish prime minister, Recep Tayyip Erdogan, at the World Cup opening ceremony in Qatar. This was their first meeting since diplomatic ties were cut after the Egyptian military ousted former Muslim Brotherhood President Mohamed Morsi in 2013.
They reportedly discussed reconciliation and matters of political and economic cooperation. Their meeting was pushed for and mediated by the Qatar regime, itself only resuming relations with Egypt in 2021.Before that, Sisi’s regime had expelled Qatar-based Al-Jazeera journalists, closed its Cairo studio and boycotted trade with a regime that supported Morsi’s Muslim Brotherhood.
Both Egyptian and Turkish economies now face increasing problems and developing internal tensions. Despite their large size relative to the Gulf states, both need financial support from their wealthy neighbours. This leads to further contradictions, as in Libya where the Turkish and Qatari regimes are supporting the opposite side to Sisi’s regime in the ongoing civil war.
Another contradiction is in Ethiopia, where the United Arab Emirates financially supports the Grand Ethiopian Renaissance Dam opposed by Egypt as a threat to its vital Nile water. The UAE regime has given arms and money to the Ethiopian government to use against Tigray fighters in the north of the country, who Sisi’s government has supported.
The US’s declining economic, military and diplomatic power in the region is leaving space for its client Gulf states to flex their muscles, and Sisi looking for their support. Nevertheless, the US still provides $1.3billion a year for Egypt’s armed forces.
Armed forces role in economy
Military-owned businesses have played a significant role in Egypt’s economy since the 1970s. Under Sisi, this has grown considerably. From making and supplying materials the military itself needed, the armed forces now own and control a vast swathe of industries, ranging from food production, supermarkets, construction, chemicals, hotels, cement, kitchen goods and many more. They also own huge tracts of land around cities that are prime development sites.
Egyptian capitalists complain of unfair tax advantages enjoyed by the military, for example, exemption from VAT on anything deemed by the Ministry of Defence as essential to national security. This seems to include hiring an army-owned hotel for a wedding or buying a coffee there!
The forces’ business empire provides well-paid jobs for senior officers as directors and senior managers after retiring from active service. Any move to reduce this runs up against their opposition. A factor in the downfall of former president Hosni Mubarak in 2011 was the disquiet of some officers at the privatisation programme of Hosni’s son, Gamal. This was replacing retired officers with bankers and entrepreneurs from foreign corporations. Sisi does not intend to make the same mistake and lose the officers’ support, despite IMF and domestic capitalist pressure.
Trying to compensate for the inability of Egyptian capitalism to develop and provide decent jobs, living standards and public services, Sisi has pushed forward huge infrastructure projects. These include expanding the Suez Canal and a new capital city 30 miles from Cairo, estimated to cost $45billion (although likely to be much more). Armed forces companies have been awarded contracts managing these projects.
The Canal’s second channel is due for completion in 2023. The government announced last month [3rd week December] it was setting up a fund under the Suez Canal Authority to “establish companies, invest, buy, sell, lease, rent, and utilise” the assets entrusted to it. This is a move towards Canal privatisation and prompted another sign of tensions within ruling circles. A number of MPs, a former Suez Canal Authority official who is still a presidential adviser, a former minister, and several normally-tame opposition parties have made public statements condemning the proposal.
Around 40,000 civil servants are due to start moving into the new capital (yet to be named) this Januar] but schools, hospitals and restaurants aren’t yet complete and housing is too expensive for most ordinary workers to afford. Commuting from parts of Cairo could take at least five hours a day.
Sisi is hoping the huge construction will stimulate other parts of the economy into growth, but private companies see military companies squeezing the space for them to make profits and so Egypt continues to lose foreign investment.
Mass opposition will develop
Sensing its falling support among the working and middle classes and the poor, the regime has not relaxed its iron grip on any signs of opposition. Although it released about 800 political prisoners before COP27, attempting to polish its reputation before world leaders turned up, it arrested a further 1500, according to Amnesty International. Alaa Abd el-Fattah’s hunger strike highlighted that tens of thousands continue to suffer in prison, subject to torture and grim conditions. These include Muslim Brotherhood members, trade union activists, human rights and pro-democracy campaigners, who are often accused of being paid agents of foreign governments and held under anti-terrorism laws.
The government blocks 700 websites, including independent news media. Attendees at COP27 found the conference internet connection blocked access to the global rights organisation Human Rights Watch. Despite all this, international governments shore up Sisi’s regime for all their hypocritical talk of human rights. They prefer stability in this strategically vital region for world capitalism.
Despite these real difficulties and an absence of reported strikes in recent months, the intolerable conditions facing working class families and youth will break out into protests, demonstrations, strikes and occupations. Demands for independent trade unions and workers’ parties will gain support against this background.
Socialist policies that meet the needs of the working class and poor, combined with a programme of democratic rights, can also gain support. Real democracy can only be secured when all the big companies and land are nationalised with democratic workers’ control and democratic socialist planning to meet the needs of all, throughout the Middle East, North Africa and across the world.