El-Sisi sweeps to third presidential term with 89.6 percent vote: What promises await the New Republic?

Post-election austerity measures under close scrutiny by analysts
El-Sisi sweeps to third presidential term with 89.6 percent vote: What promises await the New Republic?
Egypt's President Abdel-Fattah El-Sisi

Egypt’s President Abdel Fattah El-Sisi secured a third presidential term by winning 89.6 percent of the vote, a significant victory considering the country’s prevailing economic challenges. The election featured three opposition candidates: Hazem Omar, founder and head of the Republican People’s Party; Farid Zahran, Chairman of the Egyptian Social Democratic Party; and Abdel Sanad Yamama who heads the liberal Wafd Party. 

During a press conference, President of the National Election Authority (NEA) Hazem Badawi, announced that the voter turnout for the election was the highest in Egypt’s history, reaching 66.8 percent, with over 44 million votes cast.

Following his victory, President El-Sisi delivered a speech acknowledging the substantial challenges faced by Egypt and its citizens. He recognized the resilience and wisdom of the Egyptian people in enduring economic reforms and confronting crises. President El-Sisi expressed his commitment to continue building a new republic based on a shared vision, promoting democracy, respect for the Constitution and the Law, and taking strides towards modernity and development through science and technology. He also highlighted the importance of preserving Egypt’s identity, culture, and heritage.

A series of challenges

Following the conclusion of the voting and the announcement of election results, analysts will closely monitor the implementation of austerity measures that have been delayed, as they could potentially help restore Egypt’s financial situation. The economic conditions in Egypt have become increasingly intricate, especially in light of the conflict in Gaza and the potential for the regional escalation of the conflict. Meanwhile, there is an expectation among Egyptians that the government may devalue the Egyptian pound, despite the substantial financial support received from the International Monetary Fund (IMF) and countries within the Gulf Cooperation Council (GCC). 

In November, Egypt’s urban inflation showed a slight deceleration, with consumer prices rising by 34.6 percent year-on-year, compared to 35.8 percent in October. However, inflationary pressures persist, particularly in food and beverage prices, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). 

Egypt’s external debt has soared to nearly $165 billion, equivalent to 40 percent of the country’s GDP. For the first three months of fiscal year 2023, interest payments accounted for 60 percent of government spending. Furthermore, the debt payments due in 2024 have reached an all-time high of at least $42.26 billion, as reported by central bank data.

$7 billion funding gap

The estimated funding gap for Egypt in the fiscal year 2023-2024 is approximately $7 billion, according to the Institute of International Finance (IIF). The financing is expected to primarily come from FDI and official financial flows.

Egypt’s receipt of a $3 billion financial support package from the IMF, which was agreed upon in December 2022, was halted due to Egypt’s failure to adopt a flexible exchange rate as promised.

The total value of existing Treasury bills and bonds increased to EGP5.04 trillion by the end of October 2023, compared to EGP4.35 trillion a year earlier. Additionally, the maturity period of these bills and bonds was shortened.

The average return on one-year Treasury bills rose to 26.80 percent during the auction held on November 30, up from 18.65 percent the previous year.

Data from the Ministry of Finance indicates that Egypt’s interest payments on both domestic and foreign debt more than doubled in the July-September quarter compared to the same period the previous year.

Debt rating downgrade to an unfavorable level

Egypt’s sovereign debt rating has been downgraded to an unfavorable level by the three major rating agencies: Moody’s, S&P, and Fitch.

S&P, in its downgrade issued on October 20, expressed its belief that the upcoming elections in Egypt could create an opportunity for economic reforms, including a potential devaluation of the currency to align it closer to the parallel market rate.

Fitch, in its downgrade on November 3, anticipated an acceleration of privatization efforts, a slowdown in costly large-scale infrastructure projects, and potential adjustments to the currency following the election. These actions could potentially open the door for a new and larger financial assistance package from the International Monetary Fund.

However, it is worth noting that any devaluation of the currency could potentially lead to a rise in inflation once again, posing a challenge for the country’s economic stability.

For more news on the economy, click here.

Related Topics:
The stories on our website are intended for informational purposes only. Those with finance, investment, tax or legal content are not to be taken as financial advice or recommendation. Refer to our full disclaimer policy here.