WORLD ECONOMIC JOURNAL the highest debt-to-GDP ratios among emerging markets and middle-income economies , according to the IMF .
COSTLY NEW CAPITAL
Ambitious megaprojects , intended to create jobs , attract foreign investment and sustain economic growth , have ultimately led to increasing the country ' s debt without delivering fully the expected results .
Among these endeavours is the ‘ New Administrative Capital ,’ a sprawling , futuristic city of highrises set to replace Cairo . But the scale of some of its undertakings — Africa ’ s tallest building , an artificial river , the Middle East ’ s largest church , and the country ’ s largest mosque — entailed considerable costs . The project has absorbed almost $ 60 billion in total so far . While Egyptian President Abdel Fattah Al-Sisi has repeatedly insisted that not a single pound from the government ’ s coffers was spent and that all the funding came from investors , Saheeh Misr , an independent fact-checking outlet , argues the project has aggravated the country ’ s economic crisis .
Today , almost nine years after the first announcement , more than 70 % of construction for the first phase has been completed , even though the program suffered from the withdrawal of its original Emirati backers and the insufficient funding brought by Chinese investors . According to Khaled Abbas , chairman of the Administrative Capital for Urban
Inflation , consumer prices ( annual %). Data source : The World Bank .
Development ( ACUD ), the company responsible for developing the new urban centre , the new capital is now home to 1,200 families , a fraction of its projected population of five million .
MONETARY OR FISCAL ISSUE ?
In March 2024 , as interest payments consumed more than 45 % of all revenue , the IMF agreed to finance another $ 5 billion to Egypt ’ s 2022 $ 3 billion loan contingent on structural reforms , spread over 46 months . To comply with the IMF ’ s conditions , Egypt allowed the pound to float and enacted a 6 % interest rate hike , the largest in its history .
As a result , the pound plummeted by 40 % within hours , reaching a record low , but the inflation rate declined .
The IMF ’ s recipes might be part of the problem rather than the solution , believe critical economists . " In Egypt ' s case , the IMF ' s insistence on devaluation as part of its prior actions led to inflation , which is countered with high interest rates , resulting in an economic recession ,” said Salma Hussein . “ This approach does not work for Egypt , as fiscal , not monetary , policies drive inflation . Raising interest rates doesn ' t solve the problem , and the government needs to manage the budget more effectively .”
However , with its current regional role , Egypt might negotiate better loan repayment terms , notes Hussein .
In February 2024 , some relief came from a $ 35 billion investment deal with the Emirati sovereign fund ADQ to develop the Mediterranean Peninsula of Ras al-Hekma .
Additionally , to help ease the financial burden , the government intends to trade up to 10 % of the ACUD on the Egyptian stock exchange by the end of 2024 . The move is expected to provide between $ 3 billion and $ 4 billion . Gad and Hussein are hopeful that such a deal , combined with the partial return of investments to Egypt , could offer a reprieve that the Egyptian government could use to reassess its strategy .
HIGH SOCIAL COST
So far , the population has paid a high price for Egypt ’ s economic woes . In the past years , government spending on education and healthcare declined , eventually reaching 1.16 % and 1.7 % of Egypt ’ s GDP for fiscal year 2025 / 24 , respectively . Prices for staple foods surged well beyond the headline inflation rate , which hit a record 38 % in September 2023 .
The crisis reverberated across Egypt ’ s social structure , forcing the majority of low- and middle-income citizens into debt . Ordinary Egyptians grapple with skyrocketing prices , inadequate healthcare , and power outages .
As noted by the IMF , the Egyptian government provided some relief to the most vulnerable through the Takaful and Karama programme , which was implemented for the first time in 2015 and has since expanded to more than five million households .
In early 2024 , the government also enacted a $ 3 billion social protection package , which included an increase in the public sector minimum wage and targeted support for teachers and healthcare workers .
Egypt ’ s economy continues to struggle , but at least the country is at peace .
“ All neighbouring countries are plagued by war , civil unrest , internal armed conflicts ,” said Farah Mohamed , a customer service representative . “ Life is hard , but at least we ’ re safe , and I hope one day we ’ ll make it out of this crisis .”
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