The country is trying everything to recover from the deep economic crisis deriving, first, from the Covid-19 pandemic, then from the continuation of the Russian-Ukrainian war, and is also trying to strengthen its international relations.
The Covid-19 pandemic, first, and then the outbreak of the Russo-Ukrainian war, is having a strong impact on Cairo’s economy, whose inflation rate reached 33.9% on an annual basis in May, a new record in the African country since the beginning of registrations, compared to 12.1% in the same period of 2022, due to the increase in food prices.Egypt’s official statistical agency CAPMAS attributed the price increase to food groups, especially cereals and bread (6.5%), meat and poultry (5%), fish and seafood (4.9%), cheese and dairy products and eggs (2.5%), fruit (6.2%) and coffee, tea and cocoa (4.4%). “The general consumer price index (CPI) for the whole of the Republic reached 165.5 points in March, registering an increase of 3.2 points compared to February 2023,” CAPMAS said in a statement.
At the end of March, the Egyptian central bank decided to increase interest rates by 200 basis points, or two percentage points, bringing them to 18.75%, in an attempt to counter rising inflation in the African country. In light of these data, an external helping hand seemed to be required to limit the effects of the economic crisis on the population. Some basic help came from the International Monetary Fund (IMF), which in December 2022 granted a loan of 3 billion dollars to revive the Egyptian economy and limit the growth of public debt.
The IMF’s goal was also to channel towards the North African country a total of 14 billion dollars from regional and international partners in the near future. This help, however, did not come without conditions. In fact, the IMF wants Egypt to grant more room for movement to the private sector, reducing the influence of the army in economic matters.
For his part, Egyptian president al-Sisi is also trying to develop new policies to revive the country. From the beginning of April, in fact, increases in pensions and salaries should apply, while, with the approval of the economic plan for the 2023-2024 fiscal year, the Ministry of Finance has foreseen a 28% increase in funds allocated to social benefits, compared to 17% in the last fiscal year. On the other hand, the government has not given up on a series of expensive mega-projects. It is estimated that the construction of the “New Administrative Capital”, where all the administrative offices of the Government will be moved, will cost about 59 billion dollars, while, at the same time, the construction of the new high-speed railway line continues
Al-Sisi is also trying to exploit foreign relations to his advantage, first of all, those with the European Union. Since 2016, the Egyptian government has begun to block all ships leaving for Europe used to transport migrants. The launch of this cooperation provided for funding of around 11 million euros in favour of Cairo, which is why a meeting was held at the end of March 2023 between the Vice-President of the European Commission, Schinas, and the Minister of Egyptian Foreign Affairs, Shoukry, with the aim both of strengthening diplomacy between the countries, as well as economic cooperation between the EU and Egypt, through a series of projects related to energy supply with the northern Mediterranean countries, counter-terrorism and food security.
Again, with this in mind, at the end of March, Brussels and Cairo signed an agreement which provides for the allocation of 40 million Euro to guarantee food security in Egypt. Around the same time, al-Sisi decided to join the BRICS’ New Development Bank, which will allow him to get around the problem of obtaining US dollars for imports, as the members of the latter use their own currency for trade. To this end, rapprochement with Turkey with which the restoration of full formal relations is essential, seems imminent. With this new approach, the Egyptian government would obtain great benefits in commercial terms. Turkish companies, in fact, have allegedly undertaken to make investments worth 50 million dollars on Egyptian soil, a considerable factor, given, among other things, Cairo’s need to acquire foreign currency, which it lacks.