Alongside IMF deal, Egypt promises to shrink military economic role

By Jaysim Hanspal
Posted on Wednesday, 11 January 2023 15:42

Egyptian soldiers take a selfie photo beside a military vehicle displayed at the Egyptian stand during on the first day of Egypt Defense Expo, showcasing military systems and hardware in Cairo, Egypt, December 3, 2018. REUTERS/Mohamed Abd El Ghany

As part of a $3bn IMF bailout deal struck last December, Egypt has committed to reducing the role of the military in the economy, according to the Fund, as the North African nation is seeking to revive its ailing economy.

In a statement on Tuesday, the IMF said President Abdel Fattah al-Sisi’s government has agreed to “critical” structural reforms, including “levelling the playing field between the public and the private sector”.

The IMF has said the new policy to increase competitiveness would include “military-owned companies”, an acknowledgement by the global lender of the military’s economic influence, which has notably increased under Sisi over the past decade.

The military’s overshadowing economic role has often been deplored, with critics arguing that military companies’ exclusive perks, such as tax exemptions, leave no chance for the private sector to compete in the business scene.

Military IPO

In 2019, Sisi first unveiled the intention to list Egyptian military companies for the first time in history. Should such IPOs materialise, the military firms floating their shares will disclose their financial statements.

To date, this has yet to happen, with some observers saying repeated delays over the past years suggest that there might be pushback from within the military itself.

The military is a significant part of Egypt’s infrastructure and has historically been integrated into almost every facet of Egypt’s economy, from security to manufacturing and entertainment.

This year, the Egyptian army ranked 14th globally for military strength, coming up first in Africa in a study by Global Fire Power. In recent years, the Egyptian government has stepped-up its massive arms deals with France, Russia, and the US.

After an IMF conference on the $3bn facility, the Egyptian pound (EGP) fell steeply on Wednesday, breaking above the 30 mark against the US dollar, nearly double the exchange rate of March 2022.

Cutting costs, except…

Egypt’s tenuous situation means that the its expenditure must be evaluated and restructured. Most ministries are already cutting costs to alleviate pressure on the budget. Among the few exceptions is the ministry of Defence.

Chair of the Reform and Development Party, Mohamed Anwar El Sadat, welcomed the new policy for rationalising public spending and cutting consumption. A statement from his office reads: “El Sadat demands the Prime Minister to reconsider the decision to exclude some government agencies from rationalizing spending. Every single entity in the government must eventually share the burden of cutting public expenditures and show an example of compliance with touch economic measure with no exception.”

Statement sent on 11 January 2023 from politician Anwar El Sadat

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