Mustansir Barma, a Nairobi-based policy analyst and political economist and former senior economic researcher at the American Chamber of Commerce in Egypt.
“Very difficult.” Those two words summed up presumed presidential frontrunner Abdel Fattah el-Sisi’s recent take on Egypt’s economic condition. This is perhaps an apt conclusion considering double-digit inflation and unemployment, a hole in the budget that amounts to 12 percent of the Gross Domestic Product (GDP), and another year of missed economic growth targets.
Sisi has announced parts of his economic strategy—a recent deal with an Emirati firm will see one million new low-income housing units built, and restarting Egypt’s nuclear program is key to Sisi’s approach to tackling the country’s energy crisis. While such programs are all well and good, Sisi has a real opportunity to put Egypt on an economic recovery path that will be sustainable in the long run. To do this, he will need to break out of the cycle of dependence on Egypt’s neighbors and make the tough decisions that will more often than not be out of sync with populist demands.
The challenge for Sisi will be to move away from handouts and start some real economic reforms. Since Mohamed Morsi’s ouster, Egypt has received over $15 billion in mixed assistance from Saudi Arabia, the United Arab Emirates, and Kuwait. The inflows have helped with a range of issues from currency stabilization to abating energy shortages. However, these injections are only temporary fixes that will ultimately discourage political will for meaningful reform. Expansionary strategies since the 2011 uprising have only worsened Egypt’s fiscal situation, as public debt fast approaches 100 percent of GDP. Favoring a “balanced budget” approach by financing growth with stable long-term investment would help Egypt break out of its vicious trio of subsidies, wages, and interest payments, each of which eats up about a quarter of government expenditures.
Sisi’s big test in accomplishing this will be to resist employing heavy-handed tactics and instead promote inclusive economic decision-making. Recognizing the importance of security restoration in rebuilding investor confidence, the defense minister has made this priority number one. However, the hardline approach that has all but eliminated the Muslim Brotherhood is not the way. Suppressing an environment that enables a range of voices is a pitfall that Sisi will struggle to avoid.
“Stop making demands and start working,” says the exasperated finance minister; while the labor minister has moved to enact a twelve-month ban on worker strikes. Such heavy-handed unilateral statements and actions are likely to backfire. A Sisi presidency would benefit from bringing workers to the table by empowering independent unions rather than outlawing them. Citizens should be involved in the budget-making process, and both the good and the bad sides of decisions such as the gradual elimination of food and fuel subsidies should be clearly communicated. Participatory budgeting would be a great way for Sisi to keep his mandate democratic and to not fall into Morsi’s trap, whose only democratic act was to get elected. Inclusiveness is key, and Sisi would do well to balance pragmatism with the memory of the cries for “bread, freedom, and social justice” from Tahrir Square.