CAIRO (Middle East Eye/Reuters) – Egypt has agreed to loosen the military’s grip on the country’s economy as part of an IMF bailout, as it attempts to cope with a foreign currency crunch and spiraling inflation.
The new agreement also calls for allowing a more flexible currency exchange and slowing investment in large public projects and will involve “wide-ranging structural reforms to reduce the state footprint and level the playing field between the public and private sector,” according to the IMF.
The agreement calls for Egyptian state-owned enterprises (SOEs) to open up their opaque books, the privatization of many state-owned assets, and for the government to slow spending on public projects.
Egypt’s military has historically played an outsized role in economic life. A one-time general, President Abdel Fattah el-Sisi rose to power following the overthrow of former President Mohamed Morsi. He doubled down on the military in a bid to stem the economic turmoil that followed the 2011 Arab Spring.
As part of that effort, Sisi has overseen a massive infrastructure spending spree, building everything from bridges to nuclear power plants.
His ambitions are symbolized by the construction of a sprawling new capital city with skyscrapers and luxury residences, one advocates say is designed to ease congestion in Cairo, but that critics deride as an economically impractical and irresponsible vanity project.
On Wednesday, Egypt’s pound weakened by more than 13% to a new low below 32 to the U.S. dollar as the central bank moved to a more flexible exchange rate under the terms of an International Monetary Fund financial support package.
The pound’s decline prompted speculation as to how far the currency might eventually fall, with some analysts hoping at least some foreign investors may return to the Egyptian market and Egyptians working abroad begin sending more of their savings home.