Egypt: Land allocation to military contradicts IMF terms, critics say

“There is no indication that the military is purchasing these territories. They are reportedly being allocated by the state, under the president’s orders, to the army,” says Timothy E. Kaldas, Policy Fellow at the Tahrir Institute for Middle-East Policy.

“In parallel, the Egyptian state is in financial distress. They go to the IMF for financing, because it is their last resort. The military has compelled the state to borrow large sums of money, which has resulted in immense debt, and now we continue to witness that land is allocated to the military.” 

The last package by the IMF to Cairo – the fourth in six years – is a 46-month arrangement under the Extended Fund Facility (EFF) worth $3bn. Among the facility’s requirements is “paving the way for inclusive and private-sector-led growth”.

For Kaldas, the allocation of new land to the military is a clear violation of the agreement.

“Most of the state land goes to the military or is sold to companies who have the right connections to the state. But most individuals face a lot of difficulties accessing state land and the IMF specifically wanted to change that in its latest agreement with Egypt,” he says.

“The state doesn’t get anything in exchange, and the army already doesn’t pay customs, nor taxes which makes the fair competition the IMF has called for impossible.”

‘Monopolistic behaviour’

Located in the desert, the territory given to the military comes with a depth of two kilometres on both sides of 31 new roads. 

The decree, not the first of its kind, stipulates that the General Authority of Urban Planning in coordination with “the concerned authorities in the country” will be entrusted to complete the plans for the development of these areas within one year from the date of implementing this decree.

Yezid Sayigh, a senior fellow at Carnegie, says the move is part of the military’s “monopolistic behaviour”, in reference to its economic role that spans decades.

“The designation by Sisi of land along 3,696km of intercity roads to Egypt Defence Ministry awards it exclusive commercial usufruct, violating a pledge to the IMF to “level the playing field” with the private sector and subject the military to the same rules as civilians,” says Sayigh, who’s an expert on the oversized role of Egypt’s military in the economy.

While the military is heavily involved in Egypt’s economy, from biscuit production to the construction of new cities, the private sector faces multiple pressures, including soaring costs and falling demand. 

Non-oil business activity in the most populous Arab nation has been contracting for 14 months ending January 2023, according to the IHS Markit’s purchasing managers’ index, which assesses the private sector conditions.

Sisi once said that only through the military, whose capabilities are far greater than those of the private sector, Egypt can rebuild its broken economy, particularly with regard to mega infrastructure projects.

Officials often play down claims that the military’s economic involvement overshadows the private sector. Last year, Prime Minister Mostafa Madbouly said the military companies account for less than 1% of the Egyptian economy.

Will the military be out of Egypt’s economy?

Last January, the government passed new rules aimed at curbing state spending on new projects, especially those needing US dollars, and a requirement for state entities to get approval from the central bank before spending foreign currency.

The state has also adopted the “State Ownership Policy Document” which should allow more participation for the private sector to generate economic growth and expand the levels of local investments and exports. 

The government, what’s more, is preparing to offer 20 state-run companies either through a public offering or by selling shares to investors to increase the participation of the private sector. 

The coming IPOs should include two military firms, the National Petroleum Company (NPC) and the National Co. For Natural Water in Siwa (Safi). No military company ever floated stakes.

Whether this could be deemed an indication that Egypt may finally take the long-called-for drastic step of phasing out the military’s economic role, as highlighted by a January article in The Economist titled ‘To save Egypt’s economy, get the army out of it’, is highly debatable.