The role of the Egyptian military: an overview

Egyptian army tanks during the war of the 6th of October 1973. at the national military museum of Egypt. (Photo by Shutterstock)

Can the International Monetary Fund (IMF) force Egypt to reduce the role of the army in many economic sectors? Ahmad Abdel-Rahman reports.

The new USD 3 billion-loan agreement signed between the International Monetary Fund (IMF) and Egypt, which was announced on January 10, seems at first glance to be broad and ambitious. In addition to measures to address the country's worsening currency crisis and debt aggravation, the government promised a major restructuring of the shares of the public and private sectors in the economy. The government is keen to retain - or even increase - the advantage of the military which has the lion's share of investment in sectors including real estate and transportation. .

However, if the government keeps its promises to dismantle the military in the economy the impact will be greater than that of the privatisation process that began in 1991.

The commitments made to the IMF build on the new state ownership policy that the government put in place last year. The document pledges that the military will fully exit from 79 economic sectors and partially exit 45 other sectors within three years, in return for increasing private sector participation in public investments from 30 to 65 per cent.

The proposed changes pose a threat to powerful institutional actors and interest groups. However, neither the government nor Egypt's president, Abdel Fattah el-Sisi, have publicly prepared the ground to defuse the inevitable shock or win over the military?

The fact that el-Sisi formally endorsed the new state's ownership policy, including the military, does not change matters. His immediate goal was to strike an agreement with the IMF that would allow Egypt to obtain an additional USD 14 billion in credit from other international and regional sources.

The Egyptian president's public statements and official decrees over the past few years reveal a fundamentally different purpose: to capitalise state-owned enterprises and assets such as infrastructure through an injection of private funds, while leaving them in the hands of the state.

The new legislation also allows state-owned service providers and utilities to transfer their future revenues to investors. It also allows the private sector to manage government-funded projects and public works.

Transfer of government-owned assets

The president is transferring a growing list of state assets out of government hands into the control of an increasing number of newly created bodies that report directly to him. One such fund is the sovereign wealth fund, which has emerged as el-Sisi's preferred tool for attracting private capital, rather than freely floating state companies on the stock exchange. Thus, his endorsement of a policy of state ownership is a form of disinformation that he may use to disguise his real strategy.

All of this may seem to call into question the agreed policy framework with the IMF, but both sides need an agreement that looks good even though neither have the will nor the ability to enforce it.

Nor might the army have to fight hard to maintain its economic stake: if the past is any guide, the government will dodge its IMF commitments anyway. However, the tolerance of other foreign partners, particularly in the Gulf States, is uncertain.

However, what is certain is that for the time being, el-Sisi will not allow a serious rift with the military, hoping that the government can shoulder the burden of dealing with an increasingly dissatisfied Egyptian public and appealing to foreign donors. However, he cannot postpone their confrontation indefinitely.

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Saturday, 02 December 2023