How Egypt’s stubborn poverty threatens strongman Sisi’s grip

The majority of Egyptians have agreed to 'tighten their belts' to give Sisi time for his painful, IMF-mandated economic reforms. But without a turnaround, their patience could soon run out. There are already signs of voter apathy.

Despite his landslide reelection last month and renewed talk of constitutional amendments to make him president for life, Egyptian strongman Abdel Fattah al-Sisi’s grip on power is far from absolute as he enters his second term.

Analysts warn that the retired general is presiding over a much more uncertain Egypt than when he first rose to power in a 2013 coup. Then, the military overthrow benefited from a wave of popular support as well as discontent with the then-ruling Muslim Brotherhood and Mr. Sisi’s predecessor as president, Mohamed Morsi.

Today, the Arab world’s most populous country is facing several economic, security, and diplomatic challenges that will test Sisi’s leadership and even his support within the military.

Of most immediate peril to him, analysts say, is Egypt’s chronically weak economy, and the consequential threat of instability.

So far, the vast majority of Egyptians have patiently given Sisi time for his painful, IMF-mandated economic reforms, agreeing to “tighten their belts” for the good of the country. There have been no protests in the tightly controlled country.

Yet if there is no dramatic turnaround of the economy and job creation within the next couple of years, that patience will run out, analysts warn.

“The majority in Egypt are the poor, the majority suffer from inflation and are affected most by these measures – and they are the most likely to mobilize because they literally have nothing to lose,” says Abdallah Hendawy, senior analyst at the Washington-based Arabia Foundation. 

“The next popular uprising will not be about political grievances and social justice as it was in 2011, it will happen because people will be tired, exhausted, and desperate. And that is much more dangerous,” Mr. Hendawy says.

Voter apathy

As widely expected, Sisi won 97 percent of the vote in a March contest that only featured himself and a token loyalist candidate.

Despite efforts to push Egyptians to vote that included food handouts and threats of $28 fines for abstaining, voter turnout was at 41 percent, well below the 47 percent in his first election as president in 2014.

Observers attribute voter apathy to the economy. After pushing through reforms as the condition of a $12 billion IMF loan, economic conditions in Egypt are largely worse now than when Sisi first came into office in 2014.

Inflation tripled from 10.3 percent in 2014 to 33 percent in mid-2017. Although it has stabilized, it still currently hovers around 15 percent.

Unemployment has dropped under Sisi’s watch from 13.2 percent to 11.8 percent, but nearly 30 percent of youth remain jobless while private sector job growth has dropped each month over the last two years. Egyptians under the age of 29 make up some 80 percent of the unemployed.

In compliance with the IMF loan, Sisi’s government has increased the Value Added Tax on goods and businesses, devalued the Egyptian pound, and cut fuel subsidies. The government is set to cut fuel subsidies a second time this June.

There are indications of a slow turnaround. Egypt’s GDP is expected to grow 5 percent this year, up from 3.5 percent in 2017 and a return to pre-revolution levels. Yet it is considered insufficient for Egypt’s rapidly growing population, and it’s unclear whether the growth will trickle down to the working class and poor, who have been hit hardest by the austerity measures.

In 2015, some 27.8 percent of Egyptians lived under the poverty line of $60 per capita per month, according to the Egyptian Central Agency for Public Mobilization and Statistics. Due to recent inflation and austerity measures, economic experts believe the poverty rate now stands at 35 to 40 percent of the population – as many as 38 million people.

Amid the economic hardships, the minimum wage has maintained stagnant at 1,200 Egyptian pounds a month, but has dropped in real value from $170 per month in 2014, when Sisi was first elected, to $68 in 2018.

Security challenges

The promise of security and stability after years of revolution and upheaval was one of the main drivers of support for Sisi in 2013 and 2014. But the years since have been far from stable.

In his four years as president, Egypt saw more terrorist attacks than in the 30-year reign of Hosni Mubarak, as emboldened Islamist militants, many now affiliated with ISIS, stepped up attacks not only in the Sinai Peninsula, but in mainland Egypt, including Cairo and Alexandria.

In the wake of a devastating mosque attack that killed 300 people last November, Sisi launched “Operation Sinai 2018” in February to “clear Egypt’s territory of terrorist elements.” Yet more than two months in, the massive campaign – involving the army, navy, air force, border patrol, and police – has made slow progress and has yet to dismantle, or seemingly contain, Wilayat Sinai, or Sinai Province, an ISIS affiliate.

On April 14, less than two weeks into his second term, eight Egyptian soldiers were killed in clashes with ISIS militants in central Sinai.

While analysts say it is unlikely for ISIS or Islamist militants to capture and hold territory as happened in Iraq and Syria, the long drain on the military and loss of life may shake the army’s faith in Sisi’s ability to lead the country.

Foreign aid

A hallmark of Sisi’s reign has been a reliance on international aid to keep Egypt’s economy afloat, whether it be from the IMF, the EU, the US, or, increasingly, Saudi Arabia and the UAE. 

Saudi Arabia has invested heavily in Sisi, providing the strongman with $30 billion to strengthen his rule since he came to power. The UAE, Kuwait, and Saudi Arabia combined to pump $30 billion to Sisi in 2014 alone.

Yet as oil prices remain low and Gulf states prioritize their domestic economy over foreign assistance, Cairo may suddenly find its cash flow reduced, or cut entirely.

Recent aid has been in the form of investment projects rather than cash handouts. On his first visit to Cairo as crown prince in March, Saudi heir apparent Mohammed bin Salman signed a deal providing $10 billion to develop a mega-city in Sinai. The UAE invested $6.2 billion in Egypt in 2017.

“It is coming down to a decision for Saudi Arabia and others of whether to give Sisi more money and increase electricity prices in Riyadh, or to give Sisi less money and keep electricity prices as they are,” says Robert Springborg, research fellow at the Italian Institute of International Affairs.

“Under this scenario it will be harder and harder for Egypt to get that funding.”

Dissent within military

In his recent reelection bid, Sisi was initially opposed by two army men; Sami Anan, a former member of the military supreme council, and Ahmed Shafiq, an ex-military man and former prime minister. The two only withdrew their candidacies after a campaign of harassment and detention by authorities.  

More unprecedented than their candidacies – a sign of dissent within the military – were their open criticisms of the regime, observers say.

“The question at the end of the day is: Is the military totally supporting Sisi? I don’t think so,” says Arabia Foundation’s Hendawy.

That loyalty may be put to the test yet again. Only days into his second term, Sisi loyalists in the media, parliament, and civil society are pushing for constitutional amendments to lift term limits, allowing Sisi to rule as president for life – a campaign many see as orchestrated by the president himself.

On paper, the move seems simple; the vast majority of MPs are Sisi loyalists, while the courts have been compliant to the strongman.

Yet the amendment, reminiscent of Mr. Mubarak’s corrupt 30-year rule, may serve to unite opposition groups, the middle class, concerned business elites and – most importantly – the military, which wishes to avoid a repeat of the Mubarak era, which led to the 2011 revolution in the first place.

“With everything pointing toward Sisi removing term limits, there might be a confrontation with the military over it,” says Issandr El Amrani, North Africa project director at the International Crisis Group.

“You may have people in the military who are supportive of continuity and stability right now, for a second term, but not supportive of Sisi for life – they want to avoid him running for a divisive third term.”

Should economic, security, or political situations deteriorate, there is a precedent for the army forcing Sisi out in favor of a preferred alternative. Experts say a united army could phase Sisi out as rapidly as it abandoned Mubarak in 2011.

“Otherwise, I think the best bet is that Sisi will continue to limp along, from crisis to crisis, unless one consumes him,” says Mr. Springborg.