President Abdel Fattah al-Sisi’s regime has exploited an IMF agreement to squeeze the lower classes and enrich a small clique of former generals.
arlier this month, bread riots erupted in Egypt. Thousands of angry demonstrators blocked roads and crowded around state-affiliated bakeries, protesting a government decision to reduce the number of loaves of subsidized bread each family could purchase. As security forces clashed with rioters in poor localities in Alexandria, Kafr El Sheikh, Minya, and Asyut, protesters chanted, “We want to eat!” Social media activists have dubbed the movement “the supply riots” (intifadat al-tamwin).
When President Abdel Fattah el-Sisi meets with President Donald Trump in the White House on April 3, he will no doubt portray the protests as a thing of the past and his military regime as a bastion of stability in the region. However, unrest is almost certain to return to Egypt, and the country’s army is responsible for triggering it.
The bread riots are symptoms of a crisis tracing back to last November, when the International Monetary Fund approved a loan of $12 billion to Sisi’s regime. The loan agreement requires Egypt to fix its chronic budget deficit through substantial cuts in subsidies and other forms of public spending. The agreement also necessitates steps to encourage the private sector to boost job creation and growth.
But the Egyptian army has used the agreement to punish the lower classes while maximizing its commercial gains. The military establishment, which fully controls the economic reform plan, has selectively implemented the loan’s conditions. While it enthusiastically reduces subsidies to impoverished civilians, it has expanded its domination of many economic sectors and reaped huge profits at the expense of the private sector.
The army is responsible for both managing its business empire and ruling the country. On the one hand, generals in uniform manage monopolistic conglomerates of unaudited, untaxed enterprises, such as commercial farms, food packaging mills, construction companies, pharmaceutical plants, gas stations, fisheries, and cement and steel factories. On the other hand, former officers occupy key government positions in charge of running the national economy. They have captured bureaucratic posts all the way from the president to the minister of foodstuff supply, the head of the public authority of agricultural development, the undersecretary of the housing minister, and the assistant minister of health. Moreover, they are the governors or heads of districts in the very provinces where the bread riots erupted.
The IMF loan agreement failed to fully account for the military’s domination of the economy and the state bureaucracy. Rather than implement the agreement faithfully, the military has been protecting its prerogatives at the expense of the poor as it funnels the country’s remaining resources to army officers and away from poor, suffering civilians.
The recent cascade of economic crises began last July, when lower-class mothers were confronted by a lack of government-subsidized baby formula. Their anger burst into widespread protests. Egyptian mothers demonstrated in front of government outlets while carrying their infants. The army “patriotically” resolved the problem by importing cans of the missing formula. The cans, which arrived much sooner than what an international shipment normally would take, were sold at double the price. Moreover, the Ministry of Military Production offered further help by building its own factory of baby formula.
Then, last October, less than a month before the approval of the loan, Egyptians woke up to an acute shortage of sugar. With the state unable to afford its subsidies for the sweetener, it suddenly disappeared from state-owned outlets, leading to long lines — often marked by violent arguments — to obtain a package or two of sugar. The police began arresting passers-by carrying more than their family’s “legal” share of it. Once more, the army decided to help resolve the problem. It confiscated sugar from private vendors and sold it itself.
In this way, the military positioned itself as the savior of a crisis of its own creation and further squeezed its private sector competitors. Alexandria’s military governor pledged to end the sugar crisis, blaming it on greedy private merchants. Meanwhile, the Defense Ministry’s “al-Salam Company to Sell the Armed Forces’ Products” sold 3,000 tons of affordable sugar in poor neighborhoods of the city. Sugar eventually resurfaced on the market — after the military minister of supply doubled its price.
The military regime has also used conditions in the loan to overhaul the bureaucracy. Ten days before the approval of the IMF loan, the regime enacted a law aimed at reducing the number and lowering the salaries of government employees in the country’s bloated state bureaucracy. Two days later, the state issued another crucial decision. It devalued the Egyptian pound, which meant that the money those employees earned lost half of its purchasing value.
Although seeking to shrink the bureaucracy, the regime enhanced its ability to place loyalists in key positions. One article in the new legislation retained a rule from the Hosni Mubarak era by reserving the authority to appoint officials in leadership positions to the president. Sisi has energetically exploited these powers, placing an increasing number of fellow former officers in top civilian jobs in the government and the public sector as soon as they retire.
As the Egyptian parliament voted to enact the civil servants law, it approved another piece of legislation that increased military pensions by 10 percent. It’s not the first raise army officers have received during Sisi’s time in power. In the past three years, Egypt’s president issued six decisions to raise military pensions by a total of 35 percent. Furthermore, the parliament supported a new fund to provide medical and social services to military judges. In Alexandria, some of those judges were then working to send tens of workers at the army-owned Alexandria Shipyard to military jail for inciting a strike.
On the day of the devaluation of the Egyptian pound, the military regime decided to almost double gas prices. This reduction of fuel subsidies was a step toward eliminating them. Luckily for the Defense Ministry, it owns a chain of gas stations spread across almost every road in the country.
In January, the government increased drug prices by 50 percent, which, along with the currency devaluation, resulted in tragic shortages. Upon making the decision, the minister of health appointed a former general as chairman of the state-owned vaccines company.
These cascading crises called for urgent poverty-alleviation efforts. The military stepped in with mega-construction projects that the government’s propaganda machine portrayed as designed to lift up the lower classes — social housing for inhabitants of slums and reclamation of new land for distribution to lower-class youths. Military contractors took charge of executing these over-ambitious projects, while the army’s Department of Morale Affairs made uplifting videos on their progress.
One of these mega projects is the One Million Apartments program, which Sisi launched last May in a festive event to celebrate helping the lower classes out of their slums. The president did not open this grand project to outside public tenders, but assigned it to the Engineering Authority of the Armed Forces (EAAF), a gigantic military contractor. The law of public tenders that was amended after the military seized power in 2013 and again in 2016 allows such direct assignments of government projects to military conglomerates.
Similarly, the One Million and a Half Acres agricultural project for land reclamation was assigned to the military engineers of the EAAF. Promising great prosperity to youths who apply to receive tracts of this land, Sisi asked the EAAF to quickly finish digging water wells and constructing houses, clinics, and schools in developing areas.
But although the project was advertised as an initiative to support the rural poor, the reality on the ground was far different. Army soldiers confiscated the desert land of numerous farmers in Qina, a poor province in southern Egypt, which they had reclaimed and cultivated for decades. The army accused the farmers of encroachment on state property and evicted them in order to annex their land to the project. Qina’s governor, a former general, used heavy loaders to demolish farmers’ properties on 100,000 acres. Helpless civilian owners could only send complaints about the governor to Cairo’s General Authority for Agricultural Development Projects, then chaired by yet another fellow former general.
The military regime also announced the Suez Canal Axis Development Project, attempting to revive patriotic memories of national efforts to build colossal projects like the High Dam. Once more, military engineers are taking charge of this project, and they recruit laborers to travel from various localities to serve in it. Sisi refused to rely on Indian workers for the project and asked the EAAF to create jobs for local workers at good wages. An inspiring video that the EAAF disseminated interviewed tens of seasonal laborers getting off a bus that arrived at the construction site after a trip of more than 1,000 miles from Qina province. All interviewees said they were honored to serve such a nationalist cause, and then stood in a long line to register their names at a table where an army officer sat to take them.
A few days later, 200 of those very laborers returned to Qina, insisting that the military engineers didn’t provide fair wages, proper food, or places to sleep in the middle of that desert.
In applying for the IMF loan agreement, Egypt’s ruling officers granted
themselves important exemptions.
expenditures on basic goods, for instance, didn’t stop the military from lavish spending on arms procurement. From France alone, it struck deals worth over $2 billion last March. The Defense Ministry didn’t pay for those arms from the accumulated revenue of its commercial activities, but rather took loans from French banks. The military usually insists that its lucrative commercial enterprises are aimed at securing its self-sufficiency in goods and weapons, but in this case the army didn’t pay for its large shipment from its own accounts. Rather, it asked the civilian Finance Ministry to guarantee the large loan and foot the bill if the army defaults.
When the bread riots erupted last week, some Egyptians remembered similar events that occurred four decades ago. In 1977, another military president, Anwar Sadat, also tried to take the IMF’s advice and reduce food subsidies. Violent bread rioters chanted against the IMF and were quickly crushed by army tanks. Sadat canceled the decision and blamed the disturbances on communists.
The only difference in today’s riots is that there are no communists to blame. These riots are probably not entirely the IMF’s fault. The organization learned its lessons from history, and has included language in the loan agreement that the Egyptian government must strengthen “social safety nets” for the vulnerable classes affected by economic reform.
Despite the simmering discontent, the military regime feels confident enough in its grip on security to go further with extreme measures of economic reform. It has fully weakened the country’s political parties, co-opted the leaders of trade unions, and put human rights activists on trial in an attempt to prevent the sort of mass uprisings that occurred in 2011. However, the middle class, which is experiencing downward social mobility, and the lower class evidently do not need the encouragement of professional political activists to provoke them to take to the streets. Hunger and lack of affordable medicine have proven sufficient for occasional outbreaks in the north and south. These could escalate into sustained violent unrest.
Aside from news of human rights violations and persecution of political opponents, the political climate has seemed quiet and stable in Egypt for a long time. Sisi is planning his first visit to the White House and has recently received two visits from German Chancellor Angela Merkel and the U.S. head of Central Command. However, the riots reveal that, underneath this tranquility, a war is raging between the country’s domineering army and its civilian poor. The stability of Egypt’s military regime is not guaranteed to last.
