Executive summery
Egypt is currently experiencing a deep sovereign debt crisis, with its various effects extending to all sectors of the Egyptian economy. The crisis, along with high debt payments over the past two years, has led to a shortage of foreign currency. This, in turn, resulted in successive devaluations of the currency and a severe import crisis due to the scarcity of foreign exchange. The crisis has cast its final shadow through high inflation rates, reaching approximately 39.5% according to the latest data from the Central Bank of Egypt in March 2023.
The debt crisis has caused a shortage of the US dollar in the economy, with the “hot money” investors have withdrawn their investments before the outbreak of the Russo-Ukrainian war. The Federal Reserve’s continuous interest rate hikes in 2022 and 2023, along with other major central banks, put significant pressure on Egypt and other emerging markets’ balance of payments. Egypt has been experiencing this escalating debt crisis, particularly external debt, for years due to consecutive agreements with the International Monetary Fund (IMF) and the World Bank regarding economic reform plans.
These plans included years of austerity policies and multiple devaluations of the Egyptian pound against the dollar. Since 2014, the Egyptian pound has lost nearly 77% of its value against the dollar. These ongoing devaluations have directly impacted inflation rates, affecting the livelihoods of the poor and food self-sufficiency in Egypt, both at the individual and collective levels.
This crisis significantly affects citizens’ access to basic necessities, especially the poorest segments of Egyptians, thus putting the poverty and hunger syndrome to the test once again, with an increase in public debt levels. The relationship between debt and food sovereignty is crucial in understanding the current Egyptian economic crisis, aside from the technical narratives imposed by international institutions such as the IMF, the World Bank, and the Egyptian government.
Governmental economic discourse have a full alignment with the global financial institutions, this discourse puts the current economic crisis in Egypt in the context of global interest rate hikes, this discourse tends to present a technical image of the debt crisis. It frames it as an economic crisis linked to external shocks affecting emerging economies worldwide due to the Federal Reserve’s interest rate hikes in an attempt to control inflation in the United States. Additionally, major central banks raised interest rates. However, behind this technical discourse on the crisis lie many economic and agricultural policies that have made the poor more vulnerable in the face of this crisis.
The relationship between economic policies and national food systems in developing countries is complex. However, these food systems, designed based on a mixture of neoliberal economic policies and crony capitalism structures , exacerbate economic crises in general and debt crises in particular. A significant part of the debt crisis is a result of food dependency, which is part of economic dependency in the Global South.
In recent years, Egypt has increasingly relied on importing various food components from abroad, deepening food dependency and relying on scarce foreign currency reserves in these developing countries. The current crisis in Egypt is a prime example of this interdependence. The direct initial impact of the foreign currency shortage was the halt in the import of many food products that the country relies on to meet its population’s needs. This includes animal feed, which is essential for many food industries such as red meat, poultry, and eggs, serving as essential protein sources for most Egyptians. Rising prices of agricultural commodities over the past three years, starting with the COVID-19 pandemic and followed by the Russian -Ukrainian war, have also affected Egypt’s ability to provide foreign currency for food imports, especially wheat, which saw significant price increases following the Russian-Ukrainian war.
The adoption of economic dependency policies in Egypt has been evident at both the level of reliance on international debt markets to finance economic growth and the design of agricultural and food policies rooted in the neoliberal export-led growth model. Recent evidence and successive economic crises illustrate that Egypt faces significant challenges in addressing poverty, hunger, and improving nutritional indicators, particularly among children. The difficulty in this task is compounded by the neoliberal paradigm that dominates the formulation of agricultural and food policies in Egypt. In many instances, agricultural and food policies in Egypt exhibit a high degree of separation.
These unsustainable food systems, perpetuate poverty in rural areas, especially among small-scale farmers and agricultural laborers. These small-scale producers are pushed to integrate into the global market with minimal advantages. These policies have directed agricultural production towards exports but have failed to reduce the agricultural trade deficit. In fact, this deficit has increased over the years. Since the 1990s, access to good food in Egypt has become closely linked to market prices, which are influenced by various factors, including movements in the exchange rate of the local currency and imported inflation affecting millions of Egyptians.
This study aims to understand the relationship between food and the food system’s role in perpetuating dependency in its relationship with sovereign debt. It explores how economic policies, central to which is borrowing, interact to produce highly fragile food systems that reproduce poverty and hunger in the Egyptian context.
This report will be divided into three parts. The first part reviews the current sovereign debt crisis in Egypt and the political and economic discourses that frame it as a transient rather than a structural crisis, primarily originating from the interventions of the IMF and the World Bank in Egypt. In the second part of the report, I will focus on the interrelationship between food and agriculture policies and the debt crisis, illustrating how both deepen economic and food dependency, and in the final part, we will attempt to delineate the intersections between economic and food policies in Egypt in light of the current crisis.
Mohamed Ramadan\ Egypt
- Read the study in Arabic on the Link
