On the surface, Egypt’s economy seems to be doing well.
Since President Abdel Fattah el-Sisi signed on to a tough International Monetary Fund-backed reform programme in 2016, growth rates have accelerated, reaching 5.5 percent this year, the highest since 2010. Inflation has dropped to its lowest in four years, while debt and deficit rates are on a downward trend. As Egypt emerges from the IMF’s $12bn loan programme, economists and investors are hailing it as “the best reform story in the Middle East” and listing it among the world’s fastest-growing economies.
However, a deeper look at the data reveals soaring poverty rates and a middle class squeezed by high living costs – factors analysts say contributed to the small but unprecedented protests that broke out against el-Sisi over the weekend.
On Friday, thousands of people took to the streets in different parts of Egypt, including the capital, Cairo, and the second-largest city, Alexandria. Chants of “the people demand the fall of the regime” and “leave, Sisi” rang out in Cairo’s Tahrir Square, the hub of the 2011 uprising that toppled longtime ruler Hosni Mubarak. In the port city of Damietta, protesters tore down and stomped on a poster of el-Sisi, while protesters in Port Said rallied for a second consecutive night on Saturday demanding the president’s departure.
Egyptian security forces responded by dispersing the protests and arresting hundreds of people.
Such public displays of dissent are rare in Egypt, where el-Sisi has banned unauthorised assemblies and jailed thousands of dissidents. The former general was elected in 2014 after leading a military overthrow of democratically-elected President Mohamed Morsi in 2013 after mass protests. He was re-elected last year with 97 percent of the vote, in a race where the only other candidate was a supporter of his.
The immediate trigger for Friday’s anti-government protests was an online call by a self-exiled Egyptian businessman, Mohamed Ali, who has accused el-Sisi and the army of squandering public funds on vanity projects at a time of austerity.
Ali, who said he worked as a building contractor for the military for 15 years, said in one video: “Sisi has taken low-level corruption to a new level. I built five villas for Sisi’s aides and a palace for the president in a military camp in Cairo.”
El-Sisi denied the allegations as “lies” and “slander”.
‘We’re a mess’
But Ali’s claims struck a nerve with the public.
In one video response, Sherif Faranca, a fitness instructor who has nearly half a million followers on Facebook, said: “We’re all barely getting by. We’re a mess. So when we hear about the presidential palaces you’re building and your answer is ‘I’ll still build more’ … Why are they being built? Even if they aren’t for you, these serve one individual and we have so many people that we need to serve.”
Faranca’s video was watched more than 2.6 million times on Facebook.
Omar Ashour, founding director of the Critical Security Studies Programme at the Doha Institute for Graduate Studies, said Ali’s claims had tapped into long-simmering grievances in Egypt.
“There are 100 million people in Egypt, of which the overwhelming majority is under 35 years old. They are living under harsh economic conditions, marked by a lack of jobs and high living costs, as well as sustained political repression, including arrests and torture,” he said. “Put all of this together and all you need is a spark – and that was Mohamed Ali this time.”
While el-Sisi has pushed through some economic reforms, “they were partial and undertaken in a very corrupt system”, Ashour told Al Jazeera. “He removed the safety system by cutting subsidies, a critical part of many Egyptians’ lives.”
Under the IMF deal, Egypt devalued the currency by about half in 2016, slashed fuel subsidies and introduced value-added tax. Heba al-Laithy, an adviser to the Egyptian government’s Central Agency for Public Mobilisation and Statistics, told local news website Mada Masr that the austerity measures were behind the country’s increasing poverty rates.
Official figures published in July said the number of Egyptians living under the poverty line rose to 32.5 percent in 2018 from 27.8 percent in 2015. Others put the figure much higher. The World Bank said in April that “some 60 percent of Egypt’s population is either poor or vulnerable”.
Al-Laithy told Mada Masr that the austerity measures had resulted in a cumulative increase of 60 percent in the inflation rate between 2015 and 2018. But without a comparable rise in income, many Egyptians were plunged into poverty.
The Egyptian government did introduce programmes to reduce the effects of the austerity measures, including the Takaful and Karama cash subsidy programmes targeting the poor and the elderly. The World Bank said the programme covered about 9.4 million people, roughly 10 percent of Egypt’s population, but critics have said it was not enough.
“There are lots of things for people to be angry about in Egypt these days,” Steven Cook, a senior fellow at the US-based Council on Foreign Relations, told Al Jazeera.
“It is possible that the demonstration that took place will get rolling and grow bigger.”
‘No safety nets whatsoever’
In another blistering takedown of el-Sisi’s economic policies, Yehia Hamid, a former minister in Morsi’s cabinet, said the Egyptian government has “provided no safety nets whatsoever”, meaning the economic reforms are placing “a greater burden on those who can endure it least”.
In an article for the Foreign Policy magazine in June, he said the increasing political repression in Egypt meant “economic decisions are taken with scant regard for the interests of the people”.
“The Sisi government continues to borrow to fund vain and extravagant infrastructure projects. Yet most ordinary Egyptians can barely afford cooking oil,” he wrote.
A prime example of such a project is a $58bn scheme el-Sisi launched in 2015 to build a new capital. It was originally meant to be funded by developers, but a lead investor from the United Arab Emirates (UAE) walked away, and the government had to borrow $4bn from China for the first phase of the city’s construction.
In a July briefing note, Yezid Sayigh, a senior fellow at the Middle East Centre in Lebanon, said el-Sisi’s “emphasis on launching vanity megaprojects has generated significant dead capital and opportunity costs”.
At the same time, the military’s involvement in the economy has grown, he said.
The armed forces have “managed approximately one-quarter of all government-funded public works since 2014” and “intervened in economic sectors as diverse as steel and cement production and gold prospecting, with the declared aims of stabilizing market prices and increasing state revenue”.
However, he wrote: “For all their boasts of superior administrative and engineering skills, the armed forces are at least as incapable as government ministers and civilian technocrats in mobilizing greater domestic revenues sufficient to increase public consumption and expand exports.”
Ashour told Al Jazeera the military’s growing role also meant that foreign investors and private businesses were reluctant to invest in the Egyptian economy.
“The market is not free,” he said. “If you are a private businessman, you are very disadvantaged in this environment. The army has a mafia-like hold on the economy which makes it very risky for investors. You could go to jail in case of a dispute.”
In this context, Ashour said he expected the demonstrations against el-Sisi to grow.
“The structural conditions for mass mobilisation exist in Egypt. If they don’t happen on Friday again, they are bound to take place at a later time.”