Egypt at a Crossroads: Economic Challenges and Geopolitical Pressures

Egypt at a Crossroads

This is the summary of observers and experts who follow the situation in this country, whose crisis surfaced after the confrontation in the Red Sea erupted, significantly affecting navigation in the Suez Canal, the backbone of the Egyptian economy.

Essentially, Egypt suffers from a trade deficit and increasing external debts that have exceeded $165 billion, marking the worst economic challenge in its history.

At its core is the shortage of hard currency in local markets, where its price against the pound jumped to record levels of 67 pounds per dollar, compared to 39 before the war.

Like Lebanon, Egypt imports its necessities, especially food, in dollars, which it has to secure from local markets. One of the primary sources of dollar inflow in these markets is Egyptians abroad, whose remittances dwindled after authorities imposed measures on transfers to and from the country and controls on the use of ATM cards outside Egypt to prevent the outflow of hard currency.

With this reality, Egypt has lost its attractiveness as an investment destination. Added to this, tourism revenues have declined, affected by the Gaza war, especially in areas along the Red Sea, due to Houthi attacks on it, as well as the falling of drones targeting Israel, but ending up in southern Sinai, making Egypt's borders and its territorial waters in the Red Sea an extension of the insecure situation there.

In light of this reality, Egypt finds itself facing significant challenges, relying on the response of countries and lending institutions to resolve its debt crisis, countered by increasing pressure on it to accept a trade-off it has so far refused: debt cancellation or reduction in exchange for receiving Palestinians from Gaza.