Egypt tiptoes toward a 'breaking point'

Another Arab Spring? Not likely. But Egyptians' frustration is rising over President Sisi's heavy hand and a faltering economy. Sisi floated the currency on Thursday under pressure from the IMF, with which Egypt is negotiating a loan.

A tuk tuk driver, one of the lowest rungs of Egyptian society, suddenly has a popularity that eclipses the president.

As food shortages, a plummeting Egyptian pound, and factory stoppages seize Egypt, hundreds of thousands have turned to the driver of the three-wheeled motorized rickshaw to speak the truths few politicians dare.

And he has a few choice words for the once-beloved field marshal, President Abdel Fattah al-Sisi.

“Before the presidential elections, we had enough sugar and we would export rice. What happened?”‫ driver Mustapha Abdel Azeem said during a three-minute interview with the El Hayah channel in mid-October that quickly went viral and gained more than two million views in less than 24 hours.

“The top echelon spent 25 million pounds to celebrate; while the poor cannot find a kilogram of rice.”

In private, many Egyptians are more direct with their criticism.

“Sisi promised to right the economy and end corruption. He is spending lavishly while the people are starving, he is just another corrupt leader,” says Mahmoud, a Cairo shopkeeper who has not stocked sugar in nearly a week.

Sugar and other essential goods are disappearing from shelves of supermarkets across the country in one of the worst food shortages the country has seen for decades. Nearly all Egyptians blame Mr. Sisi – bold claims in a country where criticism of the strongman has been rare and often punished.

It is a dramatic turnaround from the initial outpouring of support for Sisi, who was hailed by a public fatigued by political unrest and economic instability as a stabilizing force when he came to power in 2013. The strongman, who has played to a populist tune, was for many a symbol of more prosperous times to come.

But as the prosperity never materialized, harsh economic realities have forced Egypt into austerity measures. Combined with increased repression, many Egyptians are suffering buyer’s remorse, struggling under an authoritarian regime they say is out of touch with the struggles of all levels of society.

It is yet to be seen whether growing anger with Sisi will translate into a widespread protest movement, or if the regime will double down to repress a growingly restless street. But there is an increasing sense that a reckoning is drawing nearer.

An economy under stress

Certainly, the stresses on the Egyptian economy are significant and growing.

The dropping value of the pound has driven inflation to 14 percent this year. A precipitous decline in foreign reserves has forced Egyptians to rely on the black market exchange rate, where $1 is sold for 18 Egyptian pounds, more than twice the official rate of 8.89 Egyptian pounds to the dollar. 

Meanwhile, unemployment hovers around 12.7 percent – well above the 9 percent reported shortly prior to former President Hosni Mubarak’s ouster – with joblessness hitting youths the hardest. According to various statistics, as many as 30 percent of young Egyptians are believed to be unemployed.

In part, the economic problems reflect a drop in tourism, a key sector. But decades of mismanagement by former President Mubarak haven’t helped, leaving the country with a $30.7 billion budget deficit – 9.8 percent of Egypt’s gross domestic product. (By contrast, the $587 billion US budget deficit in 2016 was 3.2 percent of GDP.)

Sisi’s economic prescriptions haven’t worked, either.

He has focused on multibillion-dollar megaprojects that border on vanity ventures, including a new capital city in the heart of the desert. Even Sisi’s signature $8 billion expansion of the Suez Canal has resulted in only 4 percent growth; Cairo had predicted 100 percent growth by 2023.

“The government’s message for three years has been: We have projects and great times to come,” says Amr Hamzawy, a former member of parliament and a professor at the American University of Cairo. “This is not enough, and now it is catching up with them.”

“People are angry because they were promised quick improvements in living conditions, and what they get instead are cuts and the message that we all have to tighten our belts and rescue our country.”

Public anger has been fanned further by public relations missteps that have made the regime seem out of touch.

This year, the state called on Egyptians to donate their fakka, or spare pocket change, to the government. And Sisi has told Egyptians to “tighten their belts” even as the government held a $5 million conference at a lavish resort in Sharm al Sheikh.

The mood in Egypt is not revolutionary, some say; it is desperate. They liken it not to the 2011 Arab Spring, but to the 1977 bread riots.

Echoes from 1977

The comparison seems increasingly relevant.

In 1977, like today, Egypt was looking for an infusion of money from the International Monetary Fund to bolster its economy. And as in 1977, today’s loan will come with conditions.

One of them is to cut subsidies in a bid to rein in public spending. 

When the government cut subsidies for flour and rice under the IMF’s direction in 1977, the riots that followed shook the nation for two days and resulted in 79 deaths. Calm was restored only when then-President Anwar Sadat reinstated the subsidies.

Today, Cairo is already taking steps to meet the IMF’s conditions. In August, it raised electricity prices between 25 and 40 percent, and it is phasing in a 13 percent value added tax. The Egyptian government is expected to cut fuel subsidies next, with the potential for a revision of flour subsidies after that.

But perhaps most controversial is an IMF demand to float of the Egyptian pound, which Egypt did on Thursday, causing the pound to weaken. The move could result in a sharp decline in the exchange rate.

The cut in subsidies, and particularly the devaluation of the Egyptian pound, is set to hit all levels of society – with hundreds of local businesses and industries across the country already stopping production of goods ranging from fruit juices to furniture.

“It is difficult to say what Egyptians’ breaking point will be,” says Eric Trager, fellow at the Washington Institute for Near East Policy and author of “Arab Fall,” a book on post-revolution Egypt.

The appetite for protests seems small. Calls for a Ghalaba Revolution – or revolution of the poor – with nationwide protests on Nov. 11 have resulted in police reportedly detaining eight citizens for their suspected involvement. Tens of thousands of activists remain behind bars – a warning for any citizens who wish to mobilize.

“It is entirely possible there might be riots as a result of economic pressures – but I don’t see, at present, much sign that a significant political protest will take place,” says H.A. Hellyer, senior nonresident fellow at the Atlantic Council and author of “A Revolution Undone: Egypt’s Road Beyond Revolt.”  

The danger is that, with no levers to voice their discontent and no indication that the economy will improve, frustration could continue to fester.

“Other regimes such as Mubarak opened up the political space to defuse socioeconomic pressures,” says Mr. Hamzawy. “But my fear is that they will resort to more oppression – and no one knows the path that will take us.”