Stabilization and Adjustment in MENA: The Case of Egypt

While it is true that the shaky current global economic situation – due to the Russia-Ukraine war, the disruption of international supply chains, and the huge shock to all economies caused by COVID-19 – has a lot to do with the difficulties that Egypt is going through, the country is not unique in facing such difficult circumstances. In fact, the world’s economies are all facing similar external challenges, yet most of them do not exhibit the depth of Egypt’s current economic problems. In addition, Egypt has been repeatedly undergoing the very same problems of the persistent debt burden, the large budget deficit, and limited exports, among others, way before all the recent shocks and international disruptions. This all points to the fact that the problems are deeper than what meets the eye. Given the importance and missing focus on this deeper level of problems, the study chooses to focus on the internal challenges. The paper’s objective is twofold. First, to analyze the real state of affairs and the different policy options in a comprehensive manner and to the fullest extent possible. Second, to suggest the correct course of action that Egypt needs to follow to exit the present crisis situation and avoid its risks. It includes a detailed explanation of what this study calls the -Vicious Circle- of poor economic performance leading to the present crisis situation, with its dangers and repercussions, as well as the expected near future “best-case” and “worst-case” scenarios given the continuation of the status quo. These scenarios all lead to the main conclusions of the above analysis and point in the direction of the root of all the country’s problems: institutional disorders in need of serious reform. Evidence-based analysis for needed institutional reform and the suggested approach for its implementation are the core of the study. when it is actually realized, Egypt can reach the High Road for Development that it deserves to be moving along.