Egypt’s economy stabilizes, yet poverty challenges remain

Egypt returned to international headlines in the latter half of the year, hosting major events that drew global attention. In October, the country welcomed a high-profile conference in Sharm el-Sheikh, where US President Donald Trump promoted a ceasefire plan for Gaza. The following month, Cairo celebrated the grand opening of the new Grand Egyptian Museum near the pyramids, attracting world leaders to the event.

Despite these high-profile occasions, significant domestic developments have received less notice. The parliamentary elections, which began in November with runoffs scheduled for early December, have largely been dominated by pro-government parties. These parties ran unchallenged for half of the parliamentary seats. Independent candidates compete for the remaining seats but often face obstacles due to limited financial resources and political connections. Critics argue that the elections primarily involve loyalists to President Abdel Fattah el-Sisi, with local human rights organizations describing the process as taking place under chronic and severe restrictions on meaningful political participation.

Many Egyptians remain largely indifferent to the elections, reflecting a trend seen since el-Sisi assumed power over a decade ago following a coup against former President Mohammed Morsi. A textile industry businessman noted the lack of public excitement compared to past elections, with fewer banners and campaign posters visible across the country.

Economic Recovery and Capital Inflows

Less than two years ago, Egypt faced its most severe economic crisis under el-Sisi. Substantial financial support from the International Monetary Fund (IMF), the World Bank, the European Union, and investment commitments from the UAE in early 2024 helped avert disaster. This assistance has contributed to a more stable economic outlook. Egypts credit rating has improved, GDP growth is rising, inflation has eased, and Gulf investment continues. Qatar plans to develop a major coastal project near el-Alamein, complementing a similar UAE-backed initiative.

The IMF recently completed its fourth review of Egypts economic reforms, releasing an additional $1.2 billion from an $8 billion loan package, of which Egypt has withdrawn $3.2 billion. While the IMF still expresses concerns about state and military involvement in the economy, the overall assessment is that Egypt is performing as expected. The ongoing peace agreement with Israel has also helped reinforce confidence in the countrys stability.

Impact on Businesses and Workers

Capital inflows have positively affected the domestic market. Banks have sufficient foreign currency, and after a significant 2024 devaluation, the Egyptian pound has stabilized, benefiting businesses. Export-oriented companies, especially in textiles, report improved performance due to competitive labor costs. Turkish firms have also entered the market, raising wages to attract workers, which benefits local employees despite still being lower in foreign currency terms compared to pre-devaluation levels.

Manufacturing businesses have seen operational improvements. Predictable exchange rates and available dollars have reduced delays in importing raw materials and exporting products. Factories are hiring again, though many positions remain temporary, causing cautious optimism among workers.

Persistent Challenges

Despite positive business indicators, structural issues remain. Economist Osama Diab notes that loans and investments mainly address short-term symptoms rather than long-term problems. Non-oil private sector activity has been contracting for most of the past five years, driven by low domestic consumer demand. Rising living costs and limited purchasing power continue to affect ordinary Egyptians.

The governments ability to meet debt obligations often conflicts with its social responsibilities. While tourism-related projects like the Grand Egyptian Museum aim to boost revenue, increases in fuel and electricity prices have added financial pressure on households. Recent labor law changes reduced mandatory annual salary increases and allowed greater use of temporary contracts, favoring employers.

Rural communities, particularly in the Nile Delta and Upper Egypt, remain heavily impacted by poverty. Farmers and small landowners struggle with rising costs and reduced subsidies. Mahmoud, a Nile Delta farmer, highlighted that benefits from tourism and urban development rarely reach rural populations, leaving them to cope with higher expenses and limited support.

In summary, Egypts economy shows signs of stabilization, supported by international loans and investment. However, significant challenges remain for ordinary citizens, particularly in rural areas, where poverty persists and the benefits of economic recovery are unevenly distributed.

Author: Jackson Miller