Abdel Fattah al-Sisi has made his first major move since formally becoming Egypt’s president in early June. He is starting to eliminate fuel and food subsidies that have crippled the country’s budget. On July 4, prices on 80-octane petrol rose by 78% to 1.60 Egyptian pounds ($0.22) a liter, and 92-octane petrol is up 40%. Natural gas for vehicles rises by 175%, The Guardian reported. Electricity subsidies will be eliminated within five years, with prices rising this month.
Sisi’s authoritarian credentials are in no doubt: He overthrew the elected Islamist president, Mohamed Morsi, last year and implemented military rule before winning an election by 97% against virtually no opposition in May; his regime has sentenced over 200 members of Morsi’s Muslim Brotherhood to death. But in policy terms, he’s a bit of a black box. He visited a woman sexually assaulted in Tahrir Square and suggested he will give up half of his wealth and cut his own salary by half, but has not said much about how he plans to reshape the turbulent country.
After so many months of unrest, harsh austerity measures might seem a risky move for Sisi. But since the 2011 revolution that overthrew Hosni Mubarak at the height of the Arab Spring, Egypt’s foreign-exchange reserves have dropped by 60%, the economy has shrunk, and the Egyptian pound has fallen sharply. “You are talking about nearly half of the population being in a state of poverty,” Samir Radwan, the finance minister in the months after Mubarak’s overthrow, told The Guardian. Public debt now exceeds 100% of GDP. Surging inflation and falling revenues from tourism have pushed the budget to breaking point.
Sisi may be gambling that Egyptians will put up with a little bit more pain in the short term to have some order back in their lives after going through three presidents and two popular uprisings in less than five years. Sisi may also be looking abroad; by driving through painful austerity measures quickly, he may be able to get international lenders to ease the pain by being viewed as a reformer. Morsi failed to implement a $4.8 billion loan from the International Monetary Fund, would have unlocked another $12 billion in loans, because of the austerity cuts reportedly tied to them.
In his recent trip around the Middle East, US secretary of state John Kerry released $575 million in military aid that had been frozen in the wake of Morsi’s arrest, and the Obama administration gave Sisi its firm backing (paywall) for the first time. A day later, an Egyptian court sentenced a group of Al Jazeera journalists to long jail terms for “airing false news” on the basis of patently absurd evidence. Perhaps Sisi hopes that being a technocrat will excuse his being an autocrat—with the West, and with his own people too.