Question: The Egyptian market is witnessing a significant rise in prices, and the Central Bank has devalued the pound. Subsequently, the state announced its intention to hold a national dialogue with all parties and released three thousand prisoners. What is the reality and causes of this economic crisis in Egypt?
Answer: Yes, several factors and international circumstances have converged to form heavy black clouds over the Egyptian economy. These black clouds have reached the proportions of a disaster, and some reports indicate that the regime and its backers have entered a state of panic and anticipation regarding what will happen. The explanation is as follows:
First: Egypt imports 85% of its wheat needs from Russia and Ukraine (Al-Arabi, 27/02/2022). With the outbreak of the Russian war against Ukraine, Egypt became one of the largest indirect victims of this war, which threatens the Egyptians' bread in terms of both availability and price. Despite announcements by Egyptian officials that wheat quantities are secure until the end of this year, wheat prices have risen significantly against the backdrop of the war in Ukraine and the disruption of exports from Russia and Ukraine. (The latest purchase by Egypt, the world's largest wheat buyer, revealed a massive jump in purchase costs compared to prices before the Russian invasion of Ukraine... Bloomberg added that in last Wednesday's tender, the state-run buyer obtained 350,000 tons at an average of $490 per ton, including shipping. This represents a staggering 44% increase over the price paid in mid-February, just before the war broke out, and the highest in at least six years... Arabi 21, 19/04/2022).
The rise in wheat prices is the first of the black clouds! Furthermore, Western sanctions on Russia due to the war in Ukraine have led to an increase in shipping prices as well as oil. This constitutes the second black cloud in Egypt and further strains the state budget, which is already exhausted by massive government corruption. The third black cloud is that the prices of feed for poultry and livestock, as well as fertilizers, have risen significantly globally after the disruption of their supply from Russia, or because their global production—especially in Europe—depends on Russian gas. (Dr. Mona Mehrez, Deputy Minister of Agriculture, confirmed that Egypt imports 95% of poultry feed. Sada El-Balad, 12/05/2018). This high percentage indicates that the regime was placing the country's food security in foreign hands.
Second: For years, Egypt has become a major producer of gas from Mediterranean fields. In the context of the war in Ukraine and US efforts to provide natural gas to European countries from various nations as an alternative to Russian gas, it is clear that the Egyptian government is cooperating with America in pumping Egyptian liquefied gas to Europe to implement the US plan. This has led to a significant rise in gas prices in Egypt. The price of domestic cooking gas cylinders rose for the second time in Egypt by 7% (CNN Arabic, 21/03/2022). Besides exhausting the ordinary citizen who thought they could breathe a sigh of relief after the Egyptian gas discoveries in the Mediterranean and Egypt's transformation into a regional hub for gas liquefaction, this rise has hit all productive sectors, including those vital to the citizen's table, such as poultry, whose rearing depends on heating (Independent Arabia, 10/04/2022). Thus, it is clear that the Egyptian regime's submission to international US policies has struck Egyptians in their livelihoods, not to mention their economic life in general. Raising the gas price was another black cloud formed by the regime to please America!
Third: After Egypt, like other so-called "emerging markets," benefited from American and international "hot money" during the COVID-19 period—when billions of dollars entered the Egyptian market during 2020 and 2021, a period of zero interest rates in America and many capitalist countries—America, for reasons related to its domestic economic and political conditions, began to raise interest rates. The interest rate hike in America unintentionally formed a large black cloud for the Egyptian economy, as $15 billion out of approximately $25 billion in "hot money" in the Egyptian market made its way toward American markets. (The Egyptian Stock Exchange lost about $4 billion of its market value during the first quarter of 2022, driven by a continuous selling wave by foreign investors since the beginning of the year. Arabi 21, 27/04/2022). (It was pointed out that foreign indirect investments "hot money" reached their highest level last September when they achieved nearly $25 billion. Independent Arabic, 08/04/2022).
Throughout its presence in Egypt, this hot money formed a kind of cover supporting the pound, which showed some signs of stability in 2020 and 2021. With the loss of these funds, the Central Bank of Egypt was forced to raise interest rates and devalue the pound, indicating a major financial crisis the state is suffering from. (According to the American agency Bloomberg, the Central Bank of Egypt's recent decisions to raise interest rates and devalue the pound came against the backdrop of the withdrawal of funds amounting to $15 billion from the local debt market in the past three weeks... Al Jazeera, 24/03/2022). (On March 21, the Central Bank of Egypt devalued the exchange rate of the pound against the US dollar by about 14 percent, following a sharp decline in foreign currency liquidity after foreign investors exited government debt instruments. This occurred after the US Federal Reserve decided to increase rates by a quarter percentage point to 0.5 percent—the first increase since 2018—prompting the Egyptian Central Bank to raise interest rates on deposits and lending by 100 basis points (one percent), followed by the devaluation of the pound. Independent Arabia, 08/04/2022).
Fourth: With this decision to devalue the pound, the prices of all types of imported goods—which are numerous—automatically rose. The regime thus formed a large black cloud hovering over the Egyptian economy, but it carries toxins rather than rain, exhausting the lives of Egyptians. Consequently, the prices of most goods in the Egyptian market ignited, and the hard currency necessary for importing wheat, oils, and other food commodities and their inputs—not to mention industrial goods—became scarce. This worsened after the state, through decades of failed agricultural policies, converted fertile agricultural fields in the Nile Basin from growing wheat and other elements of food security to growing cotton, under American directives to ensure control over the state and the Egyptian people. It is certain that the state, fearing for the Sisi regime and under the weight of all these black clouds that gathered unexpectedly at once to pose a severe threat to the Egyptian regime, has begun to seek help behind the scenes! Saudi Arabia arrived with its deposits, along with other Gulf states. (According to the Saudi Press Agency "SPA", which stated that under the directives of King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman, Riyadh deposited $5 billion with the Egyptian Central Bank... The Egyptian Central Bank had extended the term of two Saudi deposits worth $2.3 billion from repayment in April 2022 to October 2026, in addition to extending a Kuwaiti deposit worth $2 billion from repayment in April to September 2022, according to official data. Independent Arabia, 08/04/2022).
Fifth: Perhaps what indicates the severity of the financial and economic crisis in Egypt is that the failed regime relies primarily on loans to feed the economy with money, and that the Gulf pleas and deposits "neither nourish nor avail against hunger" because of the great need for funds. (The Egyptian government intends to borrow 634 billion Egyptian pounds [$34.6 billion] in the fourth quarter of the fiscal year 2021/2022, i.e., before the end of next June, according to the English-language Egyptian newspaper Daily News Egypt. Arabi 21, 10/04/2022). The loans entering Egypt were subject to massive government corruption, as regime officials plunder those funds and then leave the state to repay them, which it is unable to do today. What indicates that the state did not benefit from this borrowing policy, and that its volume over past decades of state corruption has reached a massive amount, is that the "usurious" interest on those loans has begun to consume more than half of the state's tax revenues. (On the parliamentary level, MP Diaa al-Din Dawood criticized the continued budget deficit and the expansion of borrowing, saying "Egypt is facing a huge financing crisis," noting that "public debt figures increase by 16.8 percent annually, which means that Egyptians are currently living on debt." During a speech in the Egyptian House of Representatives while discussing the final account of the 2020-2021 budget, he stated that "there are installments that consume 51 percent of budget spending, which means that Egypt is facing an inescapable disaster." Arabi 21, 22/04/2022). Thus, the regime in Egypt found no way to solve the economic dilemmas except by doubling the problem with more loans and submitting to the conditions of the International Monetary Fund!
Sixth: The failure of the regime has reached the point where its president attributes this economic weakness to population growth, even though population growth, if well-managed, aids economic growth rather than weakening it. Countries in Europe and Japan import labor and immigrants to compensate for weak population growth to develop their economies. However, the Egyptian president assigns causes incorrectly. (Egyptian President Abdel Fattah el-Sisi said that "the challenges in Egypt are greater than any government, and we are working on a plan in which we all contribute." Sisi added: The volume of economic growth in Egypt has not matched population growth rates; therefore, we sought to narrow the gap between state growth and population growth. If we do not work to control population growth, we will not feel any economic improvement... The President noted that he emphasized that challenges are greater than any president or government, but they are not greater than the people of Egypt, stressing the need to implement a plan to solve those crises. Sisi also stressed that were it not for the economic reform, conditions would have been more difficult during the Corona crisis. RT, 21/04/2021).
Seventh: One of the things the Egyptian regime fears most is that these circumstances are forcing it to reduce the crumbs of bribes it used to provide to its supporting groups via the "ration cards" issued by the Ministry of Supply. These "cards," from which his followers benefited and for which they cheered him, allowed them to find some goods at reduced prices. Today, however, these groups are rapidly decreasing, which pulls any popular carpet from under the regime's feet and makes it vulnerable to falling when popular protests begin. (Days ago, the Ministry of Supply announced a new purification of the ration card system after announcing the exclusion of eight categories from the system starting next May... Commodity subsidies in the 2021-2022 fiscal year budget amount to about 108 billion pounds [$5.8 billion]... while the government eliminated subsidies for electricity and water two years ago, making them zero. The state reduced commodity subsidies by about 54 percent over five years. Independent Arabia, 25/04/2022).
Eighth: What indicates the intensity of the regime's fear in Egypt of the consequences of this near-sudden crisis—which makes Egypt one of the first indirect victims of the war in Ukraine and American internal decisions (raising interest rates)—on top of the crisis the regime was creating for the people, is the regime's move to release prisoners and call for dialogue. (The Egyptian Ministry of Interior announced Wednesday that President Abdel Fattah el-Sisi issued a pardon covering 3,273 prisoners convicted in criminal cases. RT, 27/04/2022). This came after rapid preparations in recent days to activate the pardon committee without disclosing why it was not activated during the long period before this economic crisis. Sisi has become a "dove of peace" calling for dialogue, and dialogue with everyone. (Egyptian President Abdel Fattah el-Sisi directed on Tuesday the conduct of a "national dialogue" with all political forces without "discrimination or exception." This came during his participation in the annual "Egyptian Family Iftar" banquet, according to official and private local media... Al-Ahram (official) reported that Sisi "tasked the management of the National Youth Conference (official) to coordinate with all political party and youth movements to manage a political dialogue regarding the priorities of national action during the current stage." He requested that the results of this dialogue be raised to him personally, promising to attend its final stages. Anadolu, 26/04/2022).
Ninth: By all of this, the reality of the financial and economic crisis in Egypt becomes clear. It is a chronic crisis resulting from a policy of economic exhaustion of the people so they remain kneeling to this treacherous regime. However, many black clouds have gathered suddenly due to the war in Ukraine and American decisions specific to the internal situation after "Corona" (and within the framework of enhancing the Democratic Party's chances of winning the upcoming US Congressional midterm elections in November 2022). All of this economic reality—the old and the new—has sounded alarm bells in the corridors of the Egyptian regime. The Gulf states rushed in, and with them the Jewish entity, in an attempt to save the regime in Egypt. But it is clear that the crisis is very severe and large, resulting from a destructive economic policy followed by the state over decades under American directives to ensure the subjugation of the Egyptian people. Today, under the impact of these sudden black clouds, it has begun to turn against the regime, which is forced to abandon support for the groups that used to cheer for it. This withdraws any carpet of popular support, leaving the regime exposed and vulnerable to severe shaking, which may develop into a fatal shaking if the people insist on uprooting the regime from its foundations.
This crisis and the fire by which the Egyptian people are being scorched may be an opportunity for the sincere ones of this Ummah to support the youth of Hizb ut-Tahrir working to change this corrupt regime and establish the Khilafah (Caliphate) on the method of the Prophethood. Through it, the crops and livestock shall thrive, and Islam and Muslims shall be honored.
وَيَقُولُونَ مَتَى هُوَ قُلْ عَسَى أَنْ يَكُونَ قَرِيباً
"And they say, 'When will that be?' Say, 'Perhaps it will be soon.'" (Al-Isra [17]: 51)
3rd of Shawwal 1443 AH 03/05/2022 CE