Is this country becoming another Lebanon?

With the depreciation of the Egyptian pound, many middle-class Egyptians cannot afford to buy groceries as they used to. Currency control has been tightened in this country.

Ahmed Hassan, a 40-year-old accountant and father of three, a resident of Shobra neighborhood in Cairo, describes his experience of seeing a clear reduction in the purchase of food items as a result of the current economic crisis, saying, “When we used to go shopping. If they have, instead of buying three kilos of rice, they buy only one kilo or one-and-a-half kilos.” ​​Speaking to DW, he added, “We are trying to reduce our expenses. “Unfortunately we can’t limit everything because our kids need certain things.”

Egypt’s currency has depreciated by about a third since late October, and inflation is currently over 20 percent. Economists suspect that things could get worse. In the context of Egypt’s large informal economy, the unofficial rate of inflation is said to have risen to 101 percent.

In 2019, there were two or four Lebanese people facing exactly the same problems that the people in Egypt are facing at the moment. The economic situation of Egypt and Lebanon are very similar to each other.

Desperate local residents in Lebanon are also deprived of access to their hard-earned savings. Cities are plunged into darkness as power stations run out of fuel, pushing the country’s middle class into debt. The situation in Egypt has not yet reached this level, however, as the news of the rapid deterioration of the economic situation here is coming, the question is being raised whether Egypt is going to become the “new Lebanon” soon. ?

In a 2022 report by the Project on Middle East Democracy (POMED), a Washington-based NGO, Professor Robert Springberg, associated with Canada’s Simon Fraser University, wrote, “Lebanon’s now extremely failed economy and Egypt’s struggle There are remarkable similarities between them.” He gave an example of the disastrous results of the collapse of public trust in Lebanon and warned that if the situation in Egypt were to deteriorate as much, the effects on the society would be very serious. And will be deep.

Egypt, which has always been a favorite tourist destination, the Corona epidemic has devastated the tourism sector over the years. This sector is of exceptional importance in the Egyptian economy as the country has been making huge profits from tourism. The second major blow to the Egyptian economy was the war in Ukraine. This has resulted in a major disruption in the supply of wheat for the world’s largest wheat importing country.

Since 2014, the Egyptian government under the leadership of Egyptian President Abdel Fattah al-Sisi has promoted national “mega-projects,” including the world’s longest, driverless monorail project at a cost of $23 billion. In addition, the establishment of a completely new city near Cairo, which will be the new administrative capital of Egypt. These projects have created an artificial growth in the country. Many of the projects are also linked to the Egyptian military’s extensive money-making business network.

Such policies have given state- and military-owned enterprises enormous opportunities to dominate the economy, but they have severely hurt the private sector in Egypt, discouraged foreign investment and threatened the country’s survival. Dependence on foreign loans has to be greatly increased. Egypt has a debt of more than 155 billion dollars or (138 billion euros), and about a third of its national income goes to pay off this foreign debt.

There are some similarities between Egypt and Lebanon, for example, the level of poverty in Egypt is almost the same level of poverty in Lebanon, the poverty level in Egypt is 60% and Egyptians are at or near the poverty line. Living life.

“Egypt’s political elites want to enrich themselves at the expense of the state and the people,” says Timothy Kaldas, an expert on Egyptian political economy and a fellow at the Tahrir Institute for Middle East Policy (TIMEP). This trend and attitude would definitely be found in both countries.” Meanwhile, Yazid Saygh, an expert associated with the Carnegie Institute, said, “The Egyptian government is not as corrupt as Lebanon’s.”

Timothy Kaldas added, “For all its problems, Egypt is essentially in a much more stable situation than Lebanon and is not on the brink of total collapse like Lebanon.” Perhaps Egypt and Lebanon The biggest difference is that Egypt is said to be “too big to fail.” With about 107 million inhabitants, it is the most populous country in the region. In addition, Egypt has the most powerful army in the Middle East.

Kaldas said of Egypt’s strong position compared to other states, “What is fortunate for Egypt is that its external supporters and partner countries support Egypt regardless of its poor governance structure and internal weaknesses.” They give more importance to performance.

In mid-December, the International Monetary Fund, or IMF, approved a three billion dollar aid package for Egypt. This is the IMF’s third package for Egypt since 2016. This will help Egypt attract more investment from abroad as well as more financial aid.