Egyptian President Abdel-Fattah El-Sisi has secured another term in office after a largely uncontested election, but his real challenge lies ahead: reviving the country’s troubled economy and restoring investor confidence.
Sisi, who came to power in 2014 after leading a military coup against his predecessor Mohamed Morsi, has been praised by his supporters for restoring stability and security to the nation of 100 million people. He has also implemented a series of economic reforms, backed by a $12 billion loan from the International Monetary Fund (IMF), that have included cutting subsidies, devaluing the currency, and introducing a value-added tax.
But these measures have also come at a high cost for ordinary Egyptians, who have seen their living standards erode amid soaring inflation, unemployment, and poverty. The COVID-19 pandemic has further exacerbated the situation, causing a sharp contraction in tourism, trade, and remittances – key sources of foreign exchange for the country.
Egypt’s public debt has also ballooned to over 90% of its gross domestic product (GDP), while its foreign reserves have dwindled to less than $40 billion, barely enough to cover three months of imports. The country faces a looming repayment crisis, as it owes more than $30 billion to its external creditors in the next two years.
To avoid a default, Egypt will need to secure more financial support from its allies in the Gulf Cooperation Council (GCC), who have already provided billions of dollars in aid and investments since Sisi took power. It will also need to maintain good relations with the IMF, which has recently approved a $5.2 billion standby arrangement to help the country cope with the pandemic’s impact.
But more importantly, Egypt will need to attract more foreign direct investment (FDI) and portfolio inflows to boost its growth and create jobs. The country has a large and young population, with more than 60% under the age of 30, and a strategic location at the crossroads of Africa, Asia, and Europe. It also has a diversified economy, with sectors such as energy, agriculture, manufacturing, and services offering potential opportunities for investors.
However, Egypt also faces significant challenges that deter foreign investors, such as bureaucratic red tape, corruption, human rights violations, and security threats from Islamist militants. Sisi’s authoritarian rule has stifled political dissent and civil society, while his crackdown on the Muslim Brotherhood and other opposition groups has alienated some segments of the population.
Analysts say that Sisi will need to adopt a more inclusive and reform-oriented approach in his second term and address the underlying social and economic grievances that fuel discontent and instability. They also urge him to diversify Egypt’s foreign policy and improve its ties with other regional and international actors, such as Turkey, Ethiopia, and the United States.
Egypt is too important to fail, not only for its people but also for the stability and prosperity of the Middle East and Africa. Sisi has a historic opportunity to steer the country towards a brighter future, but he will need to act fast and wisely.
Source: Bloomberg
