GTBT - Egyptian plagues turn the country into a time bomb.

: Hubert Walas; Created: 05 June 2024

and El-Sisi clumsily tries to disarm it.

In 2022, in response to rising food prices, Egyptian President Abdel Fattah el-Sisi suggested that Egyptians could always "eat leaves from trees," as the Prophet Muhammad did while imprisoned near Mecca for three years.

This may not be a very funny joke to the people of Egypt, but it says a lot about the current economic situation of this ancient place. In 2024 A.D., more and more disasters are raining down on Egypt, like the plagues that God Yahweh brought upon the Egyptians, as described in the biblical book of Exodus.

This time, however, it's not a plague of cattle, locusts, or the turning of the Nile's water into blood, but a series of very unfavourable geopolitical, economic, and social phenomena that are turning Egypt into a bomb with a smoldering fuse. President el-Sisi is trying to put it out, but he is doing it so clumsily that his actions are beginning to look more and more like those of his ousted predecessor, Hosni Mubarak.

Let's take a look at Egypt's modern plagues. Welcome to the Twenties Report.

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Nile (still) life-giving

No video about Egypt can begin without mentioning the incredibly rich history of the site. The vestiges of ancient Egyptian civilisation are still widely present, along with the pyramids on the outskirts of Cairo, and continue to take your breath away. Romans, Greeks, Arabs, Fatimids, Ottomans, French and British have all sought control of the life-giving Nile Delta region since the dawn of civilization, which dates back at least 6,000 years. One conquest was particularly consequential. The Arab campaign of 641 AD brought Islamization and Arabization to the Egyptians, that continues in the country to this day.

The rhythm of Egypt is always set by the Nile. Egypt covers an area of one million square kilometers, but almost all of its population lives in the valley and delta of the Nile, one of the largest rivers in the world. In contrast, the riverine areas alone account for only about 4% of the country's total area. The remaining 96% is desert. Thus, the effective, habitable land area is only 40,000 square kilometers. Egypt's population of 114,000 million people effectively lives on an area smaller than that of Estonia.

As a result, Egypt's real population density is one of the highest in the world. Of course, in relation to the country's total land area, Egypt ranks distant on such a list. However, if population density is counted in relation to habitable land, Egyptians live in the most crowded area in the world, not counting small city-states. The rate of 2,850 people per square kilometer is twice that of Bangladesh and more than three times that of Palestine (before the Gaza war).

The fact is that Egypt has experienced uncontrolled population growth over the past 50 years. From 38 million in 1975, Egypt's population has tripled to 114 million today. For most of the 20th century, Egypt's fertility rate was well above four or even five children per woman, peaking at a staggering seven children at times. It has slowed somewhat in recent years, but is still at three children per woman . It means that Egypt's population continues to grow. If this rate is maintained, Egypt will have 150 million people in another 25 years.

While such a fertility rate is the dream of many developed countries, which emulate all attempts to improve demographics, it is a big problem for countries with the profile of Egypt or Nigeria. Everyone wants to live in dignity, have basic living conditions met like a good job, education, health care and a future for themselves and their children. Meanwhile, with the country's potential limited physically by geography and economically by the authoritarian regime and international conditions, the situation for Egypt and Egyptians is starting to look pretty bad. And just as President el-Sisi invoked the prophet Muhammad in describing the difficult economic situation, one might as well invoke the biblical "Egyptian plagues" described in the Book of Exodus in the context of Egypt's current situation.

Strategic bread

When Russian tanks rolled into Ukraine on February 24, 2022, not only the Ukrainans or Europe in general was shocked. A cold sweat surely broke over the face of the man watching these events from more than 2,000 kilometres away - an Egyptian official in charge of importing wheat into the country. When the war broke out, up to 70% of wheat imports, a strategic commodity for Egyptian society, came from Russia and Ukraine, countries now at war. And it should be remembered that Egypt is the world's largest importer of this grain. Immediately after the outbreak of the war, the price of wheat skyrocketed on world markets, increasing by up to 60%. For a country that has to feed a population of more than 100 million people with more than half of its needs met by imports, and whose cuisine is based on bread, called aish baladi, this was very bad news.

In an era of abundance, some may not realize it, but something as mundane as bread has all the qualities to be called a strategic commodity - especially in a country like Egypt. Aish baladi is a very important part of Egyptian cuisine and, more broadly, culture and, thus the economy. The amount of flour needed to produce this bread and other wheat products for a population of 114 million is so large that it makes Egypt the world's largest importer of wheat. As a result, the price of aish baladi is a matter of national security. It should not be surprising therefore that aish baladi is subsidized. Up to 70% of Egyptians rely on subsidized bread, and have done so for decades. When President Anwar al-Sadat tried to abolish the subsidized price of bread in 1977, it ended in protests later dubbed the "bread riots”. Some analysts also point to the "bread aspect" in the context of the outbreak of the Arab Spring in 2011. While the authorities, mindful of the potential consequences of raising the price of bread, ensured that it remained stable, they failed to see through the logistics of the subsidy program. The inefficiency of the system led to queues at bakeries, which angered the public and was one aspect of the growing discontent, which ultimately led to the removal of Hosni Mubarak from office.

For these reasons, says Salmah Arfouly of the Arab Center, the Egyptian social contract is closely tied to the price of bread and, more broadly, to the price and availability of all the basic necessities of life. Meanwhile, prices in Egypt are rising at the highest rate since measurements began. Inflation reached 40 percent in September 2023, and has now dropped only slightly to 32.5 percent. The inflation rate looks even worse if we look only at food prices. These reached 45% in March 2024. There is little comfort in the fact that a few months earlier it even exceeded 70%. Egypt's social contract is therefore in tatters, and this threatens a new phase of instability in the country.

But it is only the beginning of the problems for a country plagued by a myriad of other disasters.

The plague, literally, was the COVID-19 pandemic, which stopped all human traffic in the world. For a country like Egypt, which depends on tourism for even 50% of its income, it was a massive blow. The number of tourists dropped almost fourfold - from more than 13 million in 2019 to 3.5 million in 2020. As a result, the sector's revenues suddenly dropped by 70%. Fortunately for the country, as soon as the coronavirus pandemic was over, Egyptian tourism revived. So much so that it returned to its pre-coronavirus levels, reaching an all-time high of nearly 15 million visitors last year. The result would have been even more impressive had it not been for the events that began on October 7 in Israel and the Gaza Strip, which border Egypt's Sinai Peninsula.

The war abroad has not affected Egypt's tourism sector as drastically as COVID, but the regional turmoil is clearly having an impact on tourists' sentiments and decisions. Egypt faces stagnation or, more likely, decline in tourism by 2024. According to S&P Global Ratings, Egypt's tourism revenues will decline by 10-30% compared to last year. That's a problem because the government's official plans call for doubling the number of tourists by 2028 and for the sector to grow by 20% annually.

The regional unrest not only translates into losses in tourism, but also the plight of another pillar of Egypt's economy - the Suez Canal. Built during British rule, the canal is a major source of revenue for the Egyptian economy. Suez is one of the world's most tangible examples of how geographic location can be turned into financial gain.

The problem is that the war in Gaza, but especially the war in Yemen, is directly affecting the Suez Canal. The Egyptian president said in February that the tensions in the Red Sea have contributed to a 40-50% drop in profits from the Suez Canal. So we are talking about $5 billion, since Suez generates $10 billion in revenue each year. Even more recent figures (from April) say that traffic through the canal is down 66% compared to April 2023.

Worse still, the regional unrest is not just emanating from the eastern Red Sea. Egypt has a major problem with another emerging regional power, also large in population, Ethiopia. In this case, too, it is a body of water that is the source of the problem - but not a canal or a sea, but a river - the Nile.

For more than 10 years, Ethiopia has been building the largest infrastructure project in its history - the Grand Ethiopian Renaissance Dam. The problem is that while the new sources of electricity are essential for the growing population of Ethiopians, who even outnumber Egyptians, reaching now 130 million, on the other hand they pose a potentially deadly threat to Egyptians living downstream.

Egypt relies on the Nile's freshwater for up to 90% of its needs, not only for consumption but also for agriculture and industry. Meanwhile, the Blue Nile, on which the Ethiopian dam is placed, feeds up to 85% of the main riverbed. Cairo fears that the dam will disrupt the natural river system and cause heavy losses, especially during the dry season.

Despite more than 10 years of dispute, the issue has not been resolved in a diplomatic forum. During this time, Ethiopia has almost completed the construction of the dam and finished filling the reservoir, which Egypt has called an "illegal action”. Despite the resumption of negotiations, they continued to produce no results. As a result, Egypt's control over one of the country's most important resources has been curtailed, and in times of drought, the specter of a lack of fresh water for much of industry and agriculture will stare Egyptians in the face. But Egypt's problems, again, do not end there.

2018 was a pivotal moment for Egypt's mining sector. It was the year that Egypt went from being a gas importer to a net exporter. This was thanks to the start of gas production from the Zohr offshore field. According to Italian oil giant Eni, which has a 50% stake in the project, it is the largest field discovered on the Mediterranean shelf. Production, and therefore exports, grew steadily, peaking in 2022 when Egypt exported 8 million tons of LNG. But after that, there was a drastic drop of 50% in 2023, and now it has come to the point where Egypt has completely stopped LNG exports since May.

Again, regional instability is to blame. "With the ongoing tensions in the Red Sea, many shipowners have been navigating alternate routes such as taking the longer voyages around the Cape of Good Hope. As a result, Egyptian exports have taken a hit." - S&P Global analysts write.

In addition, after the start of the Hamas war, Israel temporarily halted production from the Tamar field, from which gas was later sent to Egyptian liquefaction facilities and then re-exported.

Yet most of the problems are at the Zohr field itself, where the operator is unable to deal with leaks in the system that allow water to enter. As a result, another source of revenue for Cairo has dried up, one that was generating up $8 billion in profits by 2022.

Hanging over all this is the problem of the two million Palestinians crammed into the southern Gaza Strip, whom the Israeli authorities would most like to see emigrate to Egypt and other Arab countries. Egypt doesn't want to hear about it, and given Cairo's mounting problems, it's hardly surprising.

So how the country's ruling elites are navigating Egypt in these difficult times? Unfortunately, it's hard not to succumb to the illusion that it, too, can be counted as another Egyptian scourge.

Change or no change?

The “Arab Spring” upheaval brought el Sisi to power. And while some of the population hoped for changes in the way the country operates, the fact is that Abdel Fattah el-Sisi is following in the authoritarian footsteps of his predecessor Hosni Mubarak. El-Sisi is already well past the ⅓ of Mubarak's reign, who has conducted the country for 30 years. Though el-Sisi recently extended that period for himself. In December, in the general elections, he secured another six-year term, garnering a breathtaking 90% approval rating. Of course, the election had little to do with democratic processes. As Human Rights Watch recalls, the campaign was characterized by arrests of opposition members, intimidation, and requirements for candidates that effectively prevented any fair competition. el-Sisi effectively silenced the dangerously gaining popularity of Ahmed Tantawi, among others.

El-Sisi is trying to seek a panacea for the country's piling up economic problems mainly with massive borrowing. From the International Monetary Fund and World Bank among others. The problem is that in doing so he has artificially maintained the exchange rate of the Egyptian pound, artificially pumping up the currency against, among others, the US dollar. This, as well as the lack of announced reforms and the aforementioned uninspiring regional situation, is worsening the already not-so-good mood of investors. Nonetheless, the latest IMF loan tranche has obligated Cairo to “let the currency loose,” and the currency, as a result, dropped on March 5 from a level of EGY 30 per one USD, to EGY 47 per $1.

However, Egypt's economic situation remains extremely difficult, and the country is running out of hard currency. Such a situation has creditors worried about Egypt's solvency, although the country's prime minister, Moustafa Madbouly, assures that the country will meet all its obligations.

Despite such a dire economic situation and the successive plagues that have befallen the country, Egypt is contemplating incredible infrastructure projects. El-Sisi, like any self-respecting autocrat, wants to leave a tangible legacy. That's what the new capital is supposed to be. The new Cairo government district, now under construction, will cost a staggering $58 billion. 50 kilometers east of Cairo, towering skyscrapers can already be seen, surrounded by desert. But that's not the only big project El-Sisi has in mind. In addition to the new capital, a new $25 billion nuclear power plant on the Mediterranean coast is to be built, and a 2,000-kilometer (1,250-mile) high-speed rail network that the government says will eventually cost $23 billion is also planned.

While new housing, electricity and interconnectivity are inevitably essential for Egypt's ever-growing population, many believe that with 60% of the country living below or on the edge of poverty, the ruling administration's priorities are upside down.

But el-Sisi and his cabinet are not giving up, even as the treasury begins to run out of borrowed money. In February, it was announced that Egypt had sold its coastal city of Ras El Hekma to the United Arab Emirates for $35 billion. Although in practice the area will remain under Egyptian jurisdiction, and Egypt itself will receive a 35% stake in the project from the Emirate's investment fund ADQ, the news caused controversy in Egypt.

The coastal Ras El-Hekmah is considered "Egypt's most beautiful beach" with white sand and turquoise water. Considering that tourism is Egypt's crown jewel, Cairo has sold the pearl in this crown to the Emirates. Some say this is not the first "trade of territory for hard currency" committed by el-Sisi. In 2016, in another controversial move, Egypt relinquished its rights to the islands of Tiran and Sanafir, recognising Saudi Arabia's sovereignty over them. Both islands are strategically located at the entrance to the Gulf of Aqaba, which is the "eastern side of the Sinai Tooth". The event sparked protests in the country and was met with great incomprehension by Egyptians. According to the Israelis, it was supposed to cost the Saudis $25 billion.

Interestingly, shortly after the announcement of the recent project with the Emirates, it was reported that Cairo is preparing another deal - again aiming to sell another resort, this time on the Red Sea coast, very close to the islands of Tiran and Sanafir. To whom? You guessed it - the Saudis. The project is said to be worth $15 billion.

Not surprisingly, millions of Egyptians do not see their future in a country plagued by economic problems, with a shortage of living space, ruled by yet another autocrat whose actions, instead of helping, are making the situation worse. The pressure to emigrate is growing. Where can one flee to? The choice is simple. The nearest prosperous place is Europe.

Meanwhile, the emigration mood in Europe is very different from what it was 10 years ago, and even Germany, which used to be a supporter of mass emigration, is changing its policy. That's why the Union is trying to stop the process. How? With money. In March, Brussels announced a 7.4 billion euro aid package for Egypt. In theory, the package is designed to help Egypt get back on track and secure a future for its people on the ground. However, looking at the history of el-Sisi's rule, there is little evidence of the introduction of far-reaching reforms that would help Egypt in the long term. To be fair, these reforms would have to start with el-Sisi himself and the state's governance system. It is therefore hard not to see the EU's move as throwing money at a problem. Human Rights Watch called the deal a "reward” for Egypt's autocratic leader.

More plagues seem to be falling on Egypt. Perhaps the biggest one of all is building new offices for itself in the new government district that is being commissioned. Ultimately, however, the victims of the plagues are the Egyptians themselves, who’s population grow by nearly 2 million a year. And as the country teeters on the brink of insolvency, the region is gripped by instability in every direction, the Nile's resources are shrinking, and living space is beginning to run out, Egypt is becoming a ticking time bomb.

Abdel Fattah el-Sisi is trying to defuse it, but his actions are beginning to look more and more like the story of Hosni Mubarak. The question remains - will the end of this story be the same?

Sources:

Hubert Walas

Founder of Good Times Bad Times, author.

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Egyptian plagues turn the country into a time bomb.

Nile (still) life-giving

Strategic bread

Change or no change?

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