Introduction

Salma Hussein

This is a new era. An era of multiple and complex crises. An era in which international financial institutions, led by the International Monetary Fund (IMF), have abandoned many of their previous beliefs, based on neoliberal principles. These principles have long been criticized by the few economists who have gone against the grain. Successive crises since the beginning of the third millennium paved the way for this era, during which the IMF made important revisions at the intellectual and discursive levels. Starting with the global economic crisis of 2007-2008, through the Arab uprisings since 2011, then under the weight of the growing discourse of inequality in economic thought by Thomas Piketty and his team, and finally, in 2015, with the adoption of the 2030 Agenda for Sustainable Development Goals (SDGs).

Thus, when the COVID-19 pandemic shocked the world in 2020, the international financial institutions became more aware of the importance of social protection and social spending, and more interested in fighting the harmful social effects of their programs, for which the IMF and the World Bank closely cooperate and ensure that social spending is not negatively affected by any prescribed austerity programs. This is the era of multiple complex crises as the world has not yet recovered from the economic and social effects of COVID-19, until it was dealt a new blow by the outbreak of the Russian war in Ukraine, followed by stubborn global inflation in a highly indebted, semi-stagnant world.

In this new era, Egypt became the IMF's second-largest client. The IMF has allowed it to borrow in extraordinary decisions beyond the amount available to it. Since 2017, it has borrowed $20 billion in three loans, in addition to a new loan of $8 billion over the next three years. The IMF has also become the godfather of Egypt's external borrowing policy, encouraging lenders in international capital markets to invest in its sovereign debt. It is safe to say that the IMF (and the World Bank behind it) has been one of the main architects of Egypt's economic policy over the past seven years, and one of the most important players to point the finger at for any failures.

The IMF reports that its first prescription in Egypt succeeded in strengthening its resilience (through the procedures of the Extended Credit Financing Program 2017-2019). The economic problems that followed this program were the result of external shocks, such as COVID-19, the Russian war in Ukraine, global inflation, rising global interest rates, and finally the Israeli war on the Gaza Strip. These are all violent external shocks. Why did these shocks affect Egypt and its citizens more than most countries with similar income levels? Why did Egypt's inflation index explode more than others? Why has the value of the local currency deteriorated? Why has the food security index deteriorated? Why have education and health reforms not led to greater equality of opportunity?

The following data shows Egypt's high vulnerability to successive economic crises, or in other words, the inability of its economy to withstand crises compared to other economies.

• The inflation rate in Egypt exceeded the average inflation rate in emerging and developing countries and took an upward trend during 2023 while it took a downward trend on average in the peer countries, reaching 8.1 %,¹International Monetary Fund, World Economic Outlook 2024, available at https://www.imf.org/en/Publications/WEO while the average inflation rate in Egypt reached 28.1%.²حسابات الباحثة من بيانات البنك المركزي المصري، متاح على https://www.cbe.org.eg/en/economic-research/statistics/inflation-rates/historical-data
• Egypt was the fifth country with the highest food inflation rate in 2023 (56.32 %),³Mohammad Jazib, “Top 10 Countries Where Food Inflation is High in 2023 (Data extracted from the World Bank Development Economics Data group)”, JangranJosh Group, November 2023, available at https://www.jagranjosh.com/general-knowledge/list-of-countries-with-highest-food-inflation-rate-1699274028-1 although the FAO’s global food inflation rate fell in the same year.⁴Food and Agriculture Organization of the UN, Food Price Index, 2024, available at https://www.fao.org/worldfoodsituation/FoodPricesIndex/en/
• After the full implementation of the measures demanded by the IMF in 2017, poverty and hunger (extreme poverty) rates rose to all-time high levels, reaching respectively 32.5 % and 6.2 % in 2018, according to data from the Central Statistical Organization (CSO).⁵الجهاز المركزي للتعبئة العامة والإحصاء، أهم مؤشرات بحث الدخل والإنفاق والاستهلاك 2020/2019، كانون الأول/ديسمبر 2020، متاح على https://www.capmas.gov.eg/Pages/Publications.aspx?page_id=5109&YearID=23629 Although poverty and hunger data for 2020 and 2022 have not yet been published, poverty is likely to exceed 35 %, according to some projections (there are no projections for hunger).⁶د. هبة الليثي، في ندوة "أين وصلت أرقام الفقر في مصر؟"، حلول للسياسات البديلة، 2023، متاح على https://aps.aucegypt.edu/ar/events/110/open-panel-discussion-at-aps-on-poverty-figures-in-egypt-an-inflation-driven-increase
• The FAO estimates that 28.5 % of the population in Egypt experienced severe to moderate food insecurity between 2020 and 2022. ⁷Food and Agriculture Organization of the UN, Interactive World Hunger Map 2023, 2023, available at https://www.fao.org/interactive/hunger-map-2023-embed-dark/en (FAO, World Hunger Map). The prevalence of undernourishment is estimated at 7.2 % during the same period,⁸FAO, World Hunger Map. the highest compared to pre-IMF cooperation period.
• Between 2016 and 2023, external debt more than doubled, rising from $55.8 billion to $164.5 billion, and its maturity structure deteriorated. Repayments due abroad within a year in September 2023 amounted to $51 billion, equivalent to about one and a half times international reserves at the end of 2023. ⁹البنك المركزي المصري، النشرة الإحصائية  الشهرية عدد 321، كانون الأول/ديسمبر 2023، متاح على https://www.cbe.org.eg/-/media/project/cbe/listing/monthly-statistical-bulletin/bulletin/dec/monthly-statistical-bulletin-321.pdf This prompted the developed world to engage the IMF in a bailout package for Egypt in 2024 to prevent it from defaulting on these obligations.¹⁰إضافة إلى زيادة قرض الصندوق من 3 مليارات إلى 8 مليارات دولار، هناك حزمة استثمار رأس الحكمة 35 مليار دولار، وحزمة مساعدات الاتحاد الأوروبي 7.4 مليارات دولار، بالإضافة إلى قروض جديدة من البنك الدولي تقدر بـ6 مليارات دولار
• In the first quarter of 2023, the Egyptian pound was already the sixth-worst-performing currency against the dollar. This was a continuation of the poor performance that prevailed throughout 2022.¹¹Lee Ying Shan, “The Egyptian Pound is amongst the worst performing currencies in 2023”, CNCB, 4 April 2023, available at https://www.cnbc.com/2023/04/05/the-egyptian-pound-is-amongst-the-worst-performing-currencies-in-2023.html

In light of these indicators, this research project attempts to provide a different narrative. Each of the papers tells an important aspect of the Egyptian “success” story. A side that is untold, or not visible enough is a side that reveals the fragility and the lack of resilience, and the high social cost of the policies implemented. The project is an addition to the critical literature on the box narrative that has emerged over the past years, revealing new aspects, or adding to those already revealed, in the assessment of Egypt's recent economic experience. More importantly, it is inspired by the reconstruction of a more synthetic picture than the one presented by the Egyptian government (and the international financial institutions), describing remedies that are more profound than those focused on improving indicators – remedies that are about improving the lives of Egyptians and other peoples.

This research project has chosen to track three aspects related to increasing the resilience of the Egyptian economy. The three aspects under study are:

• The monetary policy pursued by Egypt in recent years and the negative impact on fiscal policy, poverty, and income distribution.
• The impact of food and agricultural policies on hunger and food security.
• Is social spending, especially on education and health, sufficient and fair? How has it been affected by the complex crises? To what extent have the IMF's minimum social spending principle and the World Bank's recent plans succeeded in developing the two sectors?

Why these themes?

The 17 Sustainable Development Goals (SDGs) provide a common reference point against which policies can be evaluated. While the three papers do not directly address the SDGs, they do analyze where government policies deviate from some of the most important ones.

• The first paper draws inspiration from Goals 1, 8, 9, 10, 12, and 16. When talking about government responses to any economic dilemma, attention often turns to analyzing fiscal policies, which is important, necessary, and indispensable. However, economists rarely analyze monetary policies and trace their significant impact on fiscal policies and, ultimately, the well-being of the general public, under the belief that monetary policy is primarily a technical matter, left to central banks. There is no room for judgment or disagreement in the world of money management. The first paper discusses the fallacy of these assumptions, attempting to shed light on the most important shortcomings of monetary policy in Egypt.
• The second paper is inspired by Goals 1, 2, 12, and 15. The crises that have plagued the Egyptian economy in recent years have led to growing hunger and food insecurity. This paper analyzes how Egypt's agricultural and trade policies have contributed to its vulnerability to external and internal crises. It attempts to answer the question: Has the government's response been sound and sufficient to contain these phenomena?
• The third paper deals with policies related to Goals 3, 4, and 10. The government, the IMF, and the World Bank all share an emphasis on social spending, especially on education and health, as one of the main pillars of social protection. To what extent has this commitment to education and health been reflected in the volume, efficiency, and distribution of government spending? The paper provides an analytical reading of the Bank and Fund documents to assess Egypt's recent reforms in these two sectors.
• Finally, and more generally, in light of Goal 17, which is to revitalize the global partnership for sustainable development and strengthen its means of implementation, discussing the role and accountability of international institutions in this framework is essential to draw lessons.

Recommendations

Overall, the general trend that emerges from the three papers is that the same medicine is being reintroduced in new packaging. If floating fails to achieve its goal of stabilizing the exchange rate, more floating will do what previous floating experiments have failed to do. Similarly, in food and agriculture policies, more exports of agricultural products by subsidizing large corporations may eradicate hunger. Finally, let's keep repeating the importance of spending on education and health while continuing to downsize and privatize them, perhaps the repetition will work a miracle, increasing the number of teachers, doctors, classrooms in schools, and beds in hospitals.

As each of the three papers seeks to provide a better diagnosis of the disease, they open the discussion on better remedies through a series of recommendations. For example, on monetary policy, the recommendations range from treating inflation through a combination of fiscal and monetary policies, away from the traditional treatment of raising interest rates, to changing the "primary dealers" system, which has resulted in a few banks and investors monopolizing exorbitant profits from public debt interest, as it fully transfers indexed interest rates to government debt instruments. On the food file, the paper concludes with urgent recommendations such as freezing energy price increases of all kinds, increasing in-kind food assistance programs, especially school lunches, increasing in-kind subsidies, and reducing taxes on food products.  Finally, with regard to education and health, it is necessary to bring spending up to the level of similar countries, while increasing wages for workers in the two sectors, eliminating the shortage of workers, and redistributing income, especially through progressive tax reforms, to provide sources of funding for these measures. It is important to allow a greater degree of autonomy and decentralization in the distribution of education allocations so that more allocations go to regional directorates and schools. It is also important to increase support for health in the poorest geographic areas through the provision of free primary care services.

All in all, the three papers, when read together in this particular order, provide insight into the most important aspects of the current economic crisis. The first paper (monetary policy) proposes policies that would open up fiscal space so that the government can finance the measures recommended in the next two papers. However, it is also entirely possible to read each paper separately for an in-depth understanding of the different dimensions of the crisis.

After all, these papers come at a time when Egypt is beginning to implement a new four-year package of IMF programs (of which one year has already passed). The papers then offer a viable approach to evaluating the measures of this package, both by providing a critical analysis of previous programs and remedies, and by comparing the recommendations to current government policies.