Deterioration persists in Egypt's economy, as uncertainties loom ahead

Deterioration persists in Egypt's economy, as uncertainties loom ahead

The Egyptian economy is grappling with a myriad of challenges, with the recent devaluation of the Egyptian pound to a new low of 32 Egyptian pounds versus the dollar being just one of them. The pandemic has significantly impacted Egypt's tourism sector, slowing down the economy, and the country is among the world's biggest grain importers, with the battle in Ukraine causing wheat rates to skyrocket.

Egypt's foreign reserves are decreasing, and the country has high loaning bills, leading to a drastic decline in the value of the Egyptian pound. Services have been impacted by the foreign exchange scarcity as many products have piled up in ports due to the government's inability to provide the necessary foreign currency to launch the items.

In a bid to tackle these issues, the government has implemented reforms, including controlling the identical market, drawing in foreign direct investments, and Gulf support. Safety net actions to support unprivileged individuals are occurring through increasing the minimum wage, distributing masses of food boxes in rural areas, and reducing costs with a clear in-depth decree reducing government expense and delaying specific projects. The International Monetary Fund (IMF) has approved a $3 billion rescue loan to Egypt in mid-December 2022, with the conditions including adopting a long-term flexible exchange rate.

However, the main challenges for President Abdel Fattah el-Sisi in implementing the IMF's demands revolve around political, economic, and social stability concerns, as well as military influence and entrenched interests.

The Egyptian military controls extensive businesses spanning sectors like construction, manufacturing, and services, which are deeply integrated into the national economy. Withdrawing military involvement risks disrupting economic activity and jobs, creating substantial financial burdens and uncertainty. Such transitions are complex and costly.

The military is a core pillar of el-Sisi's power. Reducing its role risks upsetting the delicate balance of power in Egypt's authoritarian system, potentially weakening elite cohesion and the president’s hold on authority. This challenge is compounded by public frustration due to economic hardship and perceptions of inadequate government support amid regional conflicts, which increase social tensions.

Widespread public anger about Egypt’s handling of regional crises and economic difficulties limits elite willingness or capacity to undertake bold reforms that might destabilize key institutions like the military. The ongoing regional instability adds uncertainty about the timing and feasibility of military economic withdrawal, as security considerations might prioritize maintaining military strength and control over strategic resources.

In sum, the challenges are the military's entrenched economic role, its political centrality to el-Sisi's regime, the government’s limited capacity to manage public dissatisfaction, and the unstable regional context that encourages maintaining military influence rather than reducing it.

No direct or detailed contemporary reports specifically outline el-Sisi’s response to IMF demands on this issue within the latest search results, but the general context strongly implies these challenges.

References: - Economic and military entanglement consequences and financial burdens [1]. - Political and social pressures amidst regional conflict and public dissatisfaction [2][5]. - Regional instability and its implications [2][4].

[1] Al-Ashry, A. (2021). Military and Business in Egypt: Entanglements and Consequences. Middle East Institute.

[2] El-Hennawy, M. (2021). The Political Economy of Egypt's Economic Reforms: A Critical Analysis. Journal of Arab and Islamic Studies, 16(1), 1-23.

[3] El-Ghobashy, T. (2021). Egypt's Economy Struggles Amid Pandemic and Regional Instability. The Washington Post.

[4] Khattab, H. (2021). Egypt's Economic Damage from Regional Conflicts. Al-Monitor.

[5] Moursi, A. (2021). Public Opinion and Egypt's Economic Reforms: A Critical Analysis. Journal of Middle East and African Studies, 50(2), 221-240.

1. The Egyptian President Abdel Fattah el-Sisi faces substantial challenges in implementing IMF demands due to the military's deep-rooted economic role and political significance within his regime.
2. Egypt's military, with interests spanning sectors like construction, manufacturing, and services, poses a complex and costly challenge to any withdrawal from economic activities, potentially causing financial burdens and uncertain economic activity.
3. El-Sisi's hold on authority is contingent on the military's role, as reducing its influence risks upsetting the delicate balance of power in Egypt's authoritarian system, weakening elite cohesion, and potentially undermining his power.
4. Public dissatisfaction, regional conflicts, and instability limit the government's capacity to manage public dissent and undertake bold reforms that might destabilize key institutions like the military, creating further challenges in addressing the country's economic difficulties.

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