Stop Funding Sisi’s House of Cards

On Sunday, a horrific fire at a Coptic church in greater Cairo’s Imbaba neighborhood killed 41 people, including 18 children. It was the latest in a string of disasters that have recently befallen Egyptians. Since January 2021, Egypt has experienced building collapses, train accidents, and a variety of other misfortunes with alarming regularity, resulting in many deaths and injuries. These incidents echo the wave of catastrophes that Egyptians endured in the last years of former Egyptian President Hosni Mubarak’s long rule that were invariably the result of some form of official malfeasance.

If the calamities of the late Mubarak period contributed to Egypt’s instability, could similar preventable tragedies do the same? Absolutely. And if that instability contributed to Mubarak’s fall from power, might it do the same to Egyptian President Abdel Fattah al-Sisi? It could, but it probably will not. That may sound odd, especially because analysts often infer that rulers might find themselves out of a job when instability becomes a feature of politics. Yet, in Egypt at this moment, that does not seem to be the case.

Against the backdrop of entirely preventable catastrophes, Egyptians—like many living in middle- and low-income countries around the world—are confronting a food crisis caused by forces beyond their own government’s control. They are also grappling with a financial crisis that is entirely of Sisi’s making. As his predecessors discovered, it is hard to generate prosperity in Egypt. The number of people who enter the country’s workforce each year is vast, and a variety of structural challenges—notably an enormous bureaucracy and a military that crowds out the private sector—serve as barriers to foreign investment that hamper broad-based and inclusive economic growth.

Confronted with this reality, Sisi and his advisors have opted to create the impression of growing societal affluence. Sisi has made enormous investments in a Suez Canal bypass, weapons systems, a nuclear reactor, and, of course, Egypt’s New Administrative Capital. The photos of what has been completed and the cost of this mega of mega-projects underscore the scale of Sisi’s efforts to convince Egyptians that Egypt is on the move and can still do great things.

Yet these projects are mostly a scam. Sure, the new Tahya Misr Bridge just north of central Cairo—the widest suspension bridge in the world—along with new interchanges and flyovers that have popped up in Egypt over the last decade are important, if sometimes controversial, improvements that can contribute to economic development. But other projects have gone forward with little study and little economic justification.

The return on investment in what some erroneously referred to as the “New Suez Canal,” which mostly widened and expanded a 21-mile bypass along the northern section of the waterway, cost $8.5 billion. It was supposed to speed up transit through the canal and thus increase revenues for Egypt, but it remains unclear whether the record amount of money the Suez Canal Authority is making is the result of this lane or a just a function of increasing fees the authority has levied in recent years on the ships that bear the 12 percent of global trade that passes through the canal.

Egypt does not need a nuclear reactor—it has a surplus of electricity. And what is the justification for a new capital that costs in the neighborhood of $60 billion? Yes, Cairo is a traffic-clogged mess, and its infrastructure is creaky at best, but the new city is not being built for average Egyptians. It is set to be an exclusive compound for government workers, senior officials, and other elites. A more prudent approach would be to devote those resources to fixing some of Cairo’s most glaring problems. Measured against Egypt’s significant needs, a new city from scratch should be in the category of “would be nice to have” as opposed to “we need to break the bank to get it.”

And break the bank is precisely what Sisi has done. Egypt’s balance sheet is ugly. It is one of the most debt-ridden countries in the world. The Egyptian government is borrowing money just to service the interest on its existing debt. As a friend from Cairo recently relayed to me, “Everyone in Cairo is now an expert on the U.S. Federal Reserve bank. When it will raise interest rates and by how much. People are scared.”

They should be. Another interlocutor told me that the “only thing people seem to be talking about these days is how expensive everything has become and the presumed upcoming second round of devaluation.” In 2016, Egypt’s Central Bank devalued the country’s currency to comply with the International Monetary Fund’s conditions for a loan. As a result, overnight everything became more expensive. No wonder Egyptians are dreading further devaluation. Egypt’s deteriorating financial condition may be why its Central Bank chief resigned—or was forced to resign—on Wednesday.

The bill is coming due. Goldman Sachs recently concluded that the Egyptian government needs $15 billion in financing just to fund its operations. Sisi’s Saudi, Emirati, and Qatari patrons in the Persian Gulf are worried enough that they have committed $22 billion over the last few months. Government officials contend that Goldman’s number is way too high, but they acknowledge that Egypt will be seeking another IMF loan in addition to the one it received in 2016 and two other infusions of money from the fund in 2020.

The IMF is likely to help with a fairly easy program—Egypt is seen as too big to fail—but it will not be condition- or cost-free. And that is where Sisi’s political need to create the impression of prosperity might intersect with objective reality: specifically, that Sisi has not delivered what he promised and instead has run the country’s economy into the ground.

Egyptians who have no say in how their leaders spend what there is of the country’s wealth are going to endure the additional pain required to clean up Egypt’s balance sheet. That is likely to entail a host of unpopular policies including the aforementioned devaluation as well as privatization of state-owned enterprises—sources of jobs that might disappear—by new owners, higher fees for everything, and significantly less of everything else.

How much are Egyptians willing to endure? No one knows. More than a decade ago, many people who were paid to know the answer to that question thought Egyptians would be willing to endure a lot—until Jan. 25, 2011, when Egyptians made it clear they weren’t and launched a revolution. It seems plausible that additional economic pressure will once again push people to their limits and into the streets. Look around: It already seems to be happening with some regularity around the world, including in Sri Lanka, Ecuador, India, Iran, Kazakhstan, and elsewhere.

Egypt’s leaders are aware of the risk. When Sisi met with U.S. President Joe Biden on the sidelines of the Gulf Cooperation Council Plus 3 meeting in July, the Egyptian leader was mostly concerned with food prices.

Perhaps Egyptians are too afraid to protest now. That’s certainly understandable given that Egypt’s prisons are overflowing with the government’s real and perceived political opponents who are reportedly subjected to horrifying prison conditions. Yet the Egyptian state’s repressive capacity is hardly a guarantee against popular mobilization—as 2011 showed. And Mubarak actually had an advantage that Sisi does not. Sisi doesn’t have a political party on which to deflect blame and focus anger in the way Mubarak was able to use the National Democratic Party.

As a result, Sisi is missing a layer of regime defense that Mubarak enjoyed for a good portion of his 30-year tenure. This means that Egypt’s internal security services must act with maximum brutality in order to make it extremely costly for citizens to step out of line. Yet overreliance on coercion contains significant risks, including the potential to push people past the point of fear and make them brave enough to say, “We have nothing to lose. We are no longer afraid.”

If instability were to become a more prominent feature of Egyptian politics and society, it seems intuitive that Sisi’s rule could also be in jeopardy. Yet there are no credible alternatives to the current Egyptian president and thus no apparent threat to his power. Even during the Mubarak period, one could imagine alternatives to the president. This is no longer possible.

As such, the major power centers—the military, intelligence services, senior judiciary, and leadership of the police—have not shown much inclination to break with Sisi and will likely stay that way even if Egyptians collectively find ways to express their grievances. What would be the point of replacing one military officer? If, of course, Sisi were to place the country’s social cohesion in jeopardy, that would be a different story. That is a red line that both Mubarak and his successor Mohamed Morsi crossed, prompting the senior military command to dismiss them both.

The gap between Sisi’s durability and the political conditions in the country is important. It indicates that in Egypt, what you see is what you get: an entrenched leader atop a country that is coming undone—let’s call it authoritarian instability. The problem is that as Sisi continues to spend on projects of questionable value to the country, the burden falls on Egyptians, further undermining the threadbare conditions under which many are compelled to live.

In time—perhaps soon—there is going to be a limit to the amount of help wealthy countries can provide Egypt given the myriad crises around the globe. That would be bad first and foremost for Egyptians but could also potentially have an adverse effect on stability in North Africa, the Levant, and even Europe.

The best thing that Saudis, Emiratis, Qataris, Americans, and IMF officials can do is to resist the idea that Egypt is “too big to fail.” It may be, but bailing Sisi out with free money and easy IMF conditionality is only going to prolong Egypt’s crisis. It is simply folly to keep financing his Emerald City and other flights of fancy. To do otherwise is asking for trouble.