Page 32 - Issue 59

ELITE
Vol.1

Issue 59

September
dollars. These by turn led to record-high suitable if Egypt was not in dire need of
2023 inflation. dollars. Others suggest unifying the budget.
The rocky road ahead According to Carnegie endowment for
Whatever road Egypt chooses, it will be international peace, a think tank, there are 59
rocky. The worst is yet to come. Egypt’s state-owned economic authorities operating
external debt repayments are expected to across 12 sectors with independent budgets
peak in 2024, rising by 10$bn from around that, in total, equal the entire state budget.
$19bn in 2023 to $29bn. That is 85% of its These authorities could have helped by
$34.4bn foreign reserves, most of which is transferring profits to the state budget, but
composed of gulf deposits. Some options are they have been losing for a while and actually
available, most of them with high costs. The rely on the state budget to fund their gap.
first is another devaluation, which Egypt is There are also special slush funds that belong
entitled to if it wants to get another tranche to ministries and government agencies. These
from its $3bn deal with IMF. The last one funds are not oversighted and obscure.
did not do much, however, and inflation is According to estimates, from 2014, they total
already at 38%. But it seems the most $9.4bn. Moreover, there are the tax-exempt
appealing one to the government. Since Mr. military owned enterprises, whose finances are
Abdelfatah El Sisi rose to power in 2014, the not oversighted as well. According to the
currency has been devalued 3 times in 10 president, Mr. Abdelfatah El Sisi, they
years. The devaluation is actually inevitable. accounted for 2% of the Egyptian economy in
Along with having tremendous external debt 2016, which most likely has increased
repayments, Egypt has a funding gap caused significantly since then. Though it would
by persistent deficit in its current account surely help, no one knows how much help it
that used to be filled with hot cash. Either can offer as these funds are obscure. The fact
the government weakens the currency, or it that some of them are losing also limits how
uses its reserves to protect it, which is not an much can help.
option since, as mentioned before, most of If things globally get worse, the results will be
Egypt’s foreign reserves are gulf states’ catastrophic. Say, another conflict or crisis
deposits, which means Egypt cannot use that would lead to higher or longer inflation in
them to support the EGP. The next the US or disturbance among investors
devaluation is matter of how much and happened, Egypt’s economy will suffer much
when. According to Mr. Ziad Dauod of more. The conflict between Israel and the
Bloomberg, it is only a matter of time. Palestinian resistance has already weighted its
Another one is selling state and military pressure on Egypt by increasing oil prices and
owned companies to foreign investors, which damaging its tourism sector. Israel also cut off
is also another condition for receiving more gas exports to Egypt, which led to longer gas
money from the IMF. So far, the cuts, further undermining the performance of
government has sold assets worth $1.9bn the economy, as it tries to increase pressures
and is planning to shift another $5bn by on President Sisi to let Israel force migrate the
June 2024. Though it would provide some people of Gaza to Sinai. In order for Egypt to
dollars in the short run it is a bad one for the recover, it needs prices in the US to cool first
long run as shareholders will withdraw their and the Fed to lower interest rates. For the
profits outside of the country. Selling to meantime, Egypt needs to take hard and
local investors would have been more painful measures, but fast.
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