Egypt: Impact of Government on the Economy Essay

Sep 13, 2018 in Analysis


Since the revolution in 1954, there have been four presidents in Egypt. Gamal Nasser failed to adjust economy to a socialist model. Anwar Sadat made it more market-oriented. Hosni Mubarak promoted privatization. The military regime that came to power in 2013 focused on fighting unemployment and improving infrastructure. Each of the four presidents had his own vision on how to develop Egypt's economy.

Gamal Nasser, 1954-1971

Gamal Abdel Nasser, the first president of the renewed country, tried to adopt economic principles of the socialist states and attempted to industrialize the economy that was heavily agriculture-oriented. Nasser nationalized the land that had long been owned by the feudal landlords and donated it to the poor (Economy Watch, 2010). During that time, the government launched a campaign aimed to improve the quality of life of the working class by promoting free education and providing employment opportunities. Although the economy growth rates were satisfactory in the first few years after the revolution, the fiasco of Nasser's socialist reforms was inevitable. Military expenditures comprised nearly 25 percent of the country's GDP, while a part of the Sinai desert was lost to Israel (El Hamamsy, 2014).

Anwar Sadat, 1971-1981

Under Anwar Sadat, Egypt's economy became more market-based. In 1974, Sadat implemented a policy that led to the relaxation of currency regulations and resulted in a significant surge in foreign investment and a greater role of the private sector. In 1977, Sadat's government raised subsidies on rice, cooking oil, and flour and abolished dividends and salary increase (Kirkpatrick, 2011). Such reforms allowed only a limited number of people to improve their financial standing. As a result, a wave of protests hit the country in January 1977. After hundreds were killed in the riots, the government was coerced to stop the price increases while preserving salary increases for public sector employees.

Hosni Mubarack, 1981-2011

Sadat's successor, Hosni Mubarak, had demonstrated devotion to economic reforms designed by Sadat in the mid-1970s. By the time when Mubarak came to power, the Egyptian economy had accumulated impressive foreign debt. Unable to pay, the government rescheduled payments to the Paris Club and IMF in 1987. However, it was not until 1990 that the real economic reforms were introduced. The implications of the new policy looked promising: the external debt constricted from 45 billion US dollars in 1989 to 30 billion in 1993 (World Bank, 2014). In 1997, foreign reserves reached an all-time peak and the budget deficit was greatly reduced. In 2004, President Mubarak initiated a chain of reforms that promoted privatization and resulted in a reduction of taxes and a greater budget transparency. Consequently, an all-time peak growth rate of around 7 percent was reached in 2008 (Malik, 2014). However, the last few years of Mubarak's presidency were marked with political instability and heavy economic losses. The uncertainty of a political climate caused the FDI inflows to decrease (United Nations, 2012).

Military regime, 2011

Egypt's second revolution in 2013 opened a new leap in the country's complicated political transition. The regime conversion has fostered the influx of financial support from the Gulf countries. At the end of 2013, Egypt's foreign reserves reached 17 billion US dollars, 0.9 billion more than a year before (World Bank, 2013). 7 billion dollars were received from Saudi Arabia, Kuwait and the UAE. The inflow of Gulf aid and the subsequent stabilization of the Egyptian Pound propelled the Central Bank to decrease key interest rates three times during the second half of 2013. At the same time, Egypt's stock market rose by 42.7% (Bank Audi, 2014).

The new government has been concentrating efforts on fighting unemployment via the activation of projects in the public sector, reducing policy uncertainty to boost private sector investment, and improving security. A stimulus package of 4.3 billion dollars was announced - a sum equal to 1.6% of GDP (Bank Audi, 2014). First of all, this is aimed to encourage construction of low-cost residential buildings, revive infrastructure projects delayed financial shortages, develop public transport, and provide financial assistance to public businesses.


Egypt's economy had to undergo major transformations over the last 60 years. Each of the four presidents changed the country's economic model in some way. Currently, it seems that political uncertainty that hampered healthy development for years has finally been replaced with stability. Greater political transparency with subsequent inflow of foreign financial aid gives promising prognoses for the future. 


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  8. United Nations. (2012). World investment report 2012. New York.

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