Egypt's Military Refuses to Aid Government Amid Debt Crisis

Egypt is facing a severe debt crisis, struggling to meet its obligations to international creditors, including a missed payment of approximately $750 million to the International Monetary Fund (IMF) due in December 2023. The government sought to borrow three trillion Egyptian pounds (approximately $63.7 billion) to alleviate its financial woes but was met with resistance from domestic banks, which cited limited liquidity. As a result, the government turned to the military for assistance, but requests for financial support were firmly rejected.

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Reports indicate that Egypt's military holds substantial secret reserves, reportedly exceeding the country's total foreign debt of $161 billion. These funds, which are physically held in state-run banks such as the National Bank of Egypt and Banque Misr, remain inaccessible to civilian authorities. A senior banking official noted that the military receives 50% of the output from Egyptian gold mines, contributing significantly to its financial resources. Despite the military's capacity to potentially cover Egypt's debts, it has consistently refused proposals to contribute to debt repayments, including those for loans taken in its own name.

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The military's economic influence in Egypt has deep historical roots, dating back to the 1952 revolution. Its role expanded significantly after the 2011 uprising and further intensified under President Abdel Fattah el-Sisi, who has been in power since 2014. The military has since diversified its interests into various sectors, including construction and agriculture, justifying its economic involvement as essential for national stability. However, this has led to a lack of transparency and oversight, with military revenues largely shielded from public scrutiny.

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Critics argue that the military's dominance over the economy is detrimental to private sector growth and overall economic performance. The IMF has warned that the military-controlled economic model hampers investment and perpetuates a cycle of debt. Observers have noted that military-owned firms enjoy preferential treatment, including tax exemptions and access to cheap labor, further entrenching their position in the economy.

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In response to the ongoing crisis, Prime Minister Mostafa Madbouly indicated that the government aims to reduce debts to unprecedented levels by the end of the year. However, no significant announcements regarding debt reduction were made by the year's end. The IMF has reached a staff-level agreement with Egypt for additional financing, contingent on the government meeting key program targets, including structural reforms aimed at reducing the state's economic footprint.

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While the military's financial holdings are acknowledged by various officials, the exact amounts and the terms of the government's financial arrangements with the IMF remain unclear. There is also a lack of transparency regarding the military's economic activities and their impact on the broader economy.

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• “Keep in mind that the military receives 50 percent of the output from Egyptian gold mines, with the proceeds going directly to it,” — Senior banking official

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• “Every time the idea was floated that the military could help with debt, even by covering its own obligations, it was shut down,” — Senior banking official

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• “Almost all aspects of the country’s economy are now controlled by the military,” — Senior banking official

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The situation in Egypt highlights the complex interplay between military power and economic management, raising questions about the future of the country's financial stability and governance.

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