Egypt's economy is doing fine, according to international financial institutions, President Abdel Fattah El Sisi said last week. “We hope the current [Iran] war in the region does not have an economic impact on us,” he said.
Less than 24 hours later, Mr El Sisi's government hiked domestic energy prices by up to 30 per cent, blaming the surge in oil prices on world markets as a result of the Iran war.
The surprise move sent shockwaves through a country where more than a third of its nearly 109 million people suffer from poverty while the overwhelming majority grapple with double-digit inflation and a seemingly endless stream of new and higher taxes.
Many Egyptians took to social media to criticise the government's decision, calling it a hasty move to fix the state's finances and cover poor handling of the economy.
Both the government and Mr El Sisi have argued there was no choice but to hike domestic energy prices to offset the fallout from the Iran war. The government has also pushed to reassure Egyptians that the hike is temporary and will be reviewed later.
In an attempt to calm the public outcry, Mr El Sisi has said the Covid-19 pandemic and the wars in Ukraine and Gaza are responsible for creating the economic conditions the country faces.
He again came to the defence of his government on Saturday, saying it only makes decisions after careful study and that raising energy prices was the least costly measure for Egyptians.
“Egypt and its government were not the cause of what Egypt has faced over the past five years,” Mr El Sisi said, explaining that the country consumes $20 billion worth of oil products annually while seeking to raise its output of renewable energy to reduce oil imports.
“It was an inevitable measure. Our situation is stable and the government did not have to resort to rolling power cuts or placing a ceiling on consumption.”
The Egyptian leader, however, blamed the government of Mostafa Madbouly, his Prime Minister of eight years, who has recently come in for scathing criticism for not adequately communicating the rationale for the decision.
“If honesty and transparency are required in these difficult times, then the government's discourse has been less than successful, which has in turn contributed to the prevailing state of concern and disruption even before the hike in fuel and gas prices,” said Ziad Bahaa-Eldin, a prominent economist and a former deputy prime minister.
He argued that the government's claim that the economy was in good shape and on the right track before the Iran war broke out was “provocative” to those who have long been struggling to make ends meet.
“The government's discourse appeared to be more concerned with justifying the government's past performance and the [energy] price hikes than producing a serious plan to deal with the current situation,” he said.
As in similar past situations in which the government raised energy prices to reduce budget deficits, President El Sisi, the chief architect of Egypt's economic policies with the final word on major decisions, appealed to Egyptians' patriotism and urged them to endure more hardships for the sake of the nation.
“The most important thing for us is to remain united and that we endure and understand the circumstances and realise that some things are out of our control,” he said on March 1. He has also said authorities were considering putting retailers who “manipulate” prices before military tribunals.
His remarks on Saturday struck the same tone. “We must stand together and pay attention to the fact that our region is changing. Some countries become unhinged because of mistaken calculations.”
Egyptians have meanwhile complained about the spike in prices of a wide range of goods and services following the hike in energy prices, with food items and transport the most heavily affected.
Struggling to cope with economic hardships has been an integral part of the life of most Egyptians since 2016, when the government began implementing the first of several IMF-inspired reform programmes that have led to major currency devaluations, partial removal of subsidies on food staples, fuel and utilities, as well as the introduction of new taxes.
However, the government has continued to press ahead with mega infrastructure projects that cost billions of dollars, including a new $60 billion capital in the desert east of Cairo, a large network of new roads, sea ports and at least a dozen new cities.
That modernisation drive has been repeatedly justified by Mr El Sisi and his government as vital to the country's future, attracting investments and improving the quality of life for Egyptians.
But critics see the spending on some of those mega projects as insensitive at a time when funds are sorely needed to improve essential services like education and health care, and millions are suffering from poverty.
It's against this backdrop that the decision to raise energy prices and the subsequent rise of food and transport prices were seen as unfair to millions of Egyptians; and evidence of a government bereft of ideas to cope with and survive crises.
“The decision was not a surprise to Egyptians and that's not because it is logical but rather because it is part of a repeated pattern that reflects total absence of what can be called the jurisprudence of priorities,” Esam Lala, an outspoken critic of the government, wrote on Facebook.
“We are faced with a policy that has no qualms about spending four or five billion dollars on an iconic tower in the middle of the desert or spending an equal amount on a monorail that will serve a limited segment not exceeding 50,000 while the majority of the population is crushed by inflation.”
