Summary by Geopolist | Istanbul Center for Geopolitics:
The policy brief titled “Egypt’s 2023-2024 Economic Crisis: Will This Time Be Different?” was written by Ruchir Agarwal and Adnan Mazarei and published by the Peterson Institute for International Economics (PIIE) in August 2024. The brief explores Egypt’s current economic crisis, which has been a recurring issue in the country’s recent history. It highlights the challenges related to balance of payments (BOP) crises and the need for international financial assistance.
Key Points:
- Historical Context: Egypt has faced multiple economic crises since its establishment as a republic in 1952, often linked to maintaining an overvalued currency and relying on international bailouts due to its geopolitical importance.
- 2023-2024 Crisis: The latest crisis was triggered by external factors like the global economic downturn, the COVID-19 pandemic, the Ukraine war, and the Gaza war in 2023, which affected vital foreign exchange sources such as tourism and the Suez Canal. The crisis was temporarily stabilized by international assistance, including a substantial financial package led by the IMF.
- Economic Measures: In response, Egypt enacted several economic measures, including significant devaluations of its currency, a commitment to a more flexible exchange rate regime, and budgetary spending cuts, such as reducing subsidies and curtailing the military’s economic role.
- Recurring Crises: The brief highlights that Egypt’s economic difficulties are deeply rooted in its political economy, characterized by a state-/military-dominated governance structure and reliance on international financial support. The country has experienced at least eight major BOP crises since 1952, with similar patterns of economic mismanagement and temporary fixes.
- Future Prospects: The policy brief questions whether Egypt will implement deeper, long-term economic reforms or continue to rely on international bailouts to address future crises. The authors express skepticism about the country’s ability to break the cycle of crises without substantial institutional and policy changes.
The document is structured into sections that review the 2023-24 crisis, Egypt’s history of BOP crises, and the prospects for future reforms.
