The helm of international economic relations turned towards Saudi Arabia and the United Arab Emirates (UAE) soon after the ouster of the Muslim Brotherhood regime in Egypt, which had leaned more towards Qatar and Turkey for support. But the route change has continued to fail to rescue current administration, make any significant progress, or lead growth indicators, social justice, and prices to shallower water.
The Gulf states—particularly Saudi Arabia, the Emirates, and Kuwait—pledged to give support worth $12.5bn in grants and deposits to the Central Bank of Egypt (50% have been received to date), next to investment commitments that amounted to about $36.5bn across different sectors.
Chairperson and CEO of Dcode Economic and Financial Consulting Mohamed Farid said that Egyptian administrations did not deal rationally with the management of aid—whether received from Qatar and Turkey, or Saudi Arabia, UAE, and Kuwait—to correct the economic path.
“Brotherly support is always a good thing,” he said. “But it should be utilised to achieve the desired economic recovery through plans and strategies that mobilise further foreign investments.”
Farid said that the economy post-30 June uprising provided solutions to several issues, such as electricity blackouts and infrastructure. Yet, the main problem hindering development is the administrative apparatus and bureaucracy spread throughout its systems, as he put it.
Farid explained that aid is only temporary, but developing resources, such as raising the efficiency of tax collection and removal of oil subsidies, is the only way to release pressure on public spending and reduce the deficit.
But the government continues to borrow from abroad to finance economic growth. Negotiations are underway with the World Bank to borrow $3bn to support the budget and a loan from the African Development Bank worth $500m are the features of a government plan to strengthen the budget with $1.5bn over three years.
Moreover, even national projects did not escape the loan spiral. President Abdel Fattah Al-Sisi’s pride─the New Suez Canal─was funded by borrowing EGP 61bn worth of investment certificates.
When Egyptian pockets turned empty, foreign loans looked more appealing. The New Administrative Capital is funded by a Chinese company in order to implement it. The first phase alone cost EGP 18bn. Furthermore, during Al-Sisi’s visit to China, he signed another loan of $1bn to support Egypt’s foreign exchange reserves, in addition to an $800m loan split among local banks.
Egypt’s baby steps to nuclear energy also relied on a foreign loan. The government has recently announced costs of the controversial Dabaa project will be covered by a loan estimated to amount to $25bn from Russia.