At the World Summit of Governments held this week in Dubai, President Abdel Fattah el-Sisi said that Egypt he needs a trillion dollar government budget every year,” of which he doesn’t have a quarter. He also indicated that Cairo needed “the help of friends, the United Arab Emirates, Saudi Arabia and Kuwait.”

In an effort to prevent a complete collapse of the economy, Abdel Fattah al-Sisi began to implement reforms such as doubling the share of the private sector from 30% to 65% by 2025, selling off dozens of state-controlled companies, banks and energy enterprises. and cuts in government spending. Thus, the requirements of the International Monetary Fund (IMF), with which a loan of $3 billion was agreed upon in December last year, are also served.

For the Gulf states and Saudi Arabia, which have unconditionally supported the Egyptian economy for about $100 billion over the past 10 years, the statement is especially attractive: firstly, a strong Egyptian economy will be less dependent on external factors, and new investors will have a chance to see their money back. at some point.

News outlets have reported these days that Gulf states such as Saudi Arabia, Kuwait and Qatar, which are seeking to diversify their economic model so that they are not solely dependent on oil and natural gas, are looking to buy assets in Egypt as the situation looks favorable for investors: on the one hand, the Egyptian pound has lost half its value against the dollar in eleven months, and on the other hand, inflation rose to 26.5% in January.

Measuring opinions about the usefulness of projects

However, most of the Egyptian economy is not suitable for privatization, as it is in the hands of the military, which deters international investors. This directly affects a number of very expensive presidential projects, such as the new capital, which is supposed to replace Cairo and has been under construction since 2015, and the Cairo monorail, which, when completed, will become the longest railway line without a conductor in the world.

However, al-Sisi defended his plans. He insisted it was necessary to attract foreign investment and help rebuild the country’s crumbling infrastructure. In addition, supporters of al-Sisi’s mega-projects have always argued that they will help boost Egypt’s economy by creating new jobs, fixing deficiencies in infrastructure and solving the problematic traffic situation in Cairo, home to 20 million people.

Critics question the sustainability of these mega projects at a time when the country is struggling to pay off its debts. “The new administrative capital, estimated at $50 billion, was launched shortly before Egypt turned to the IMF for emergency assistance, which was reckless,” said Timothy Kaldas, a fellow at the Tahrir Institute for Near East Policy, adding that “the extraordinary spending mega-projects contributed to Egypt’s debt crisis.” It is clear that the IMF agrees with this view, since the loan program requires the government to justify future spending on large projects.

Bad economic outlook

Some observers say the projects initially had a positive impact on the economy, but it was not sustainable. “The problem was that most of these projects are in non-profit sectors like construction,” says Amr Adly of the American University in the Egyptian capital. “In other words, sectors that do not directly contribute to increasing exports or decreasing imports in order to improve the trade balance.”

So far, al-Sisi has not indicated whether he is ready to cut costs after the completion of projects and to what extent. Meanwhile, Egypt’s need to fight the economic crisis by attracting foreign investors may further increase. The near-term economic outlook for the Middle East does not look promising, with a 3.2% decline in 2023 and only modest growth in 2024, according to the DNT CEO. Kristalina Georgieva.

Source: DV