PREVIEW
The President has warned he may need to renegotiate loan agreements as his state faces the costs of instability in the region
Egypt may need to renegotiate its US$8 billion loan agreement with the International Monetary Fund as it faces the costs of regional instability, President Abdel Fattah el Sisi has warned.
Sisi had a series of major diplomatic successes in March, finalising the funding deal with the IMF alongside $10bn in grants and loans from the European Union and another $3bn plus from the World Bank (AC Vol 65 No 7, Fearing a regional meltdown, Brussels pays Egypt $7.4 billion). He had previously secured investment worth $40bn with the United Arab Emirates and Saudi Arabia, while an EU-Egypt investment conference in June yielded around $30bn in investment pledges, most of them in the energy sector (AC Vol 65 No 14, Ignoring abuses, Brussels courts El Sisi with energy funds).
However, the price of the Bretton Woods and EU agreements is economic reforms, including the scrapping of subsidies on food and fuel, and cutting the role of the army in the economy.
On 18 October, Egypt raised prices on a wide range of fuel products for the third time this year, with prices of diesel and gasoline increasing by between 11% to 17%. Sisi’s ministers have warned that fuel prices will continue to rise gradually until the end of 2025.
In June, it raised the price of subsidised bread by 300%.
Sisi argues that further changes that increase the cost of living will be dictated by what Egyptians will tolerate, commenting that ‘if this challenge will hurt public opinion, that people cannot bear it, we must re-evaluate our situation’.
He contends that Cairo has lost $6-7bn in revenues so far this year, in large part because attacks by Yemen’s Houthi rebels on ships in the Red Sea have diverted large volumes of shipping traffic from the Suez Canal, costing Egypt’s Treasury over $1.5bn per quarter.
With the Gaza war between Israel and Hamas now threatening to engulf much of the Middle East, Egypt’s stability within the region is of such importance that the west will look favourably on more loans and on more generous terms.
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