Egypt's 2023-24 economic crisis: Will this time be different?

Ruchir Agarwal and Adnan Mazarei

No PB24-6, Policy Briefs from Peterson Institute for International Economics

Abstract: Egypt narrowly averted a full-blown economic crisis in early 2024 when the International Monetary Fund (IMF) and others gave Egypt a financial lifeline to curb its losses of foreign exchange reserves. This Policy Brief traces the origins and developments of the current crisis, and the country's history of repeated balance of payments crises. The 2023-24 crisis is one of eight such events in Egypt since 1952, driven by governance and policy deficiencies. The COVID-19 pandemic and the war in Ukraine have exacerbated Egypt's problems. Egypt's strategic importance in the Middle East, underscored by the Gaza conflict, has ensured continued international financial support, allowing Egypt to bet on its "too strategic to fail" position and avoid reforms. Entrenched military dominance and cronyism have obstructed necessary economic reforms. The authors conclude that Egypt needs to address these challenges and undertake major reforms to break free from its recurring cycle of crises and stop relying on international bailouts.

Date: 2024-08
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