Egypt: How a once fabulously wealthy nation became mired in financial crisis
Today the once fabulously wealthy African country has become an economic basket case unable to finance its foreign debt of about $165b nor feed its burgeoning population of 114 million people.
Egyptian President Abdel Fattah el-Sisi visits the memorial and performance grounds after his swearing-in ceremony for his third term in the New Administrative Capital (NAC) in the east of Cairo, Egypt, on April 2. (photo credit: THE EGYPTIAN PRESIDENCY/REUTERS)ByGIL ZOHAR
In biblical times, the Patriarch Jacob led his family down to Egypt, the granary of the ancient Near East, to escape famine in Canaan. By the Roman era, the Nile Valley and Delta – enriched by the river’s annual flooding with alluvial mud – had become the breadbasket of the imperial capital. King Herod built an artificial harbor at Caesarea to facilitate the crucial maritime shipment of wheat to Rome. However, today the once fabulously wealthy African country has become an economic basket case unable to finance its foreign debt of about $165b nor feed its burgeoning population of 114 million people.
President Abdel Fattah el-Sisi seized power from Islamist leader Mohamed Morsi in a 2013 coup d’état. Sisi and his military-industrial kleptocracy have taken a page from Keynesian economic theory to stimulate growth and modernize the country. But building mega-projects to fix the country’s broken finances has triggered a free fall of hyperinflation and devaluations.
The annual rate of inflation soared to almost 36% in February alone, the Central Agency for Public Mobilization and Statistics said. The Egyptian pound, called the guinea, traded at 20 to the dollar as recently as 2020. Today, one needs 50 guineas to buy a greenback. In the past 24 months, a crippling shortage of foreign currency has caused prices of goods and commodities to more than triple.
Sisi’s immediate financial problems were eased thanks to a recent bailout of more than $23b provided by the International Monetary Fund, the World Bank, and the European Union. A second $5b handout from the UAE in March for a visionary urban development on the Mediterranean coast after an initial tranche in February helped stem the flood of red ink into the Red Sea. Egypt’s net foreign assets deficit shrank $17.8b in March, its second month of decline.
Notwithstanding the aid, Egypt suffers from chronic strained services, a bloated bureaucracy, a huge government budget, and a staggering deficit. Compounding Misr’s [Egypt’s] economic misery, Hamas’s October 7 attack on Israel and the resulting Gaza war have driven away tourists from the land of pharaonic wonders and spectacular coral reefs. Houthi rockets targeting shipping in the Red Sea have shrunk revenue from the Suez Canal, which is down 40 percent this year versus the same period in 2023. Russia’s invasion of Ukraine two years ago has driven up wheat prices and made heavily subsidized bread – a staple for most Egyptians – more costly. To little avail, Egypt has cracked down on bakeries flouting price controls.
Egyptian security forces stand guard at the Rafah border crossing in the southern Gaza Strip August 30, 2008. Egypt opened its border crossing with the Gaza Strip on Saturday, allowing hundreds of people to leave the Hamas-controlled territory, Palestinian officials said. (credit: REUTERS/MOHAMMED SALEM)
Where has Egypt invested, or squandered, its money?
Where, then, has Egypt invested, or perhaps squandered, its largesse? One expensive pet project has been to expand the quasi-governmental Egyptian Railway Authority’s network of standard gauge 1,435 cm. train tracks. The system, the oldest in the Middle East dating back to the 1854 line between Alexandria and Kafr el-Zayyat on the Rosetta branch of the Nile, today extends across an impressive 10,500 km. A further 5,500 km. are currently being built, which included high-speed lines from Alexandria west to Mersa Matruh, Cairo south to Aswan, and Luxor east to Safaga via Hurghada.
Equally ambitious are plans to expand the country’s notoriously clogged highways. Transportation Minister Kamel al-Wazir, who took over the accident-plagued portfolio from Hisham Arafat following the 2019 Ramses Station train disaster in which 25 Cairenes were killed, plans to complete 1,000 bridges, tunnels, and flyovers this year. Key to the ambitious plan to clear Cairo’s perpetually clogged traffic is the completion of the shimmering new capital 50 km. east of the megalopolis, whose teeming population is estimated to be more than 22,000,000. The so far unnamed New Administrative Capital (NAC), budgeted at an eye-watering $58b and under construction for a decade, is located just east of the Second Greater Cairo Ring Road. It includes more than 30 skyscrapers, the most striking of which is the 77-floor Iconic Tower – the tallest building in Africa. The Green River Park will be a vast urban oasis double the size of New York’s Central Park.
Apart from these vast infrastructure projects, Egypt has also been burnishing its cultural heritage. In 2022, the Ministry of Tourism and Antiquity launched the Holy Family Trail, stringing together some 25 stops along the celebrated route that Jesus, Mary, and Joseph took to escape King Herod’s wrath. Last year, the government restored the medieval Ben Ezra Synagogue in Fostat (Old Cairo), the home of the Cairo Geniza.
The long-delayed Grand Egyptian Museum in Giza is scheduled to officially open this summer – though no date has been announced. Twenty years in the making, the GEM is currently in a soft-opening period, with a section of the 81,000 sq. m. site open for limited guided tours. Touted as the largest archaeological museum complex in the world, the GEM will house more than 100,000 artifacts. It will showcase the treasures discovered in the tomb of Tutankhamun in 1922.
King Tut’s funerary possessions had been on display at downtown Cairo’s Egyptian Museum in Tahrir Square, a hopelessly inadequate leftover from Britain’s colonial rule. There, a decade ago, I wandered in sensory overload gawping at the Aladdin’s Cave of Wonders. As if guided by divine providence, or perhaps Ra or Isis, I stumbled upon the Merneptah Stele – a three-meter high, black granite inscription by the New Kingdom pharaoh dated circa 1208 BCE that was discovered in Thebes by pioneering archaeologist Flinders Petrie in 1896.
With irony rivaling the poem “Ozymandias” which Percy Bysshe Shelley penned in 1817, line 28 of the Stele reads: “Israel is laid waste – its seed is no more.”■
