Motives and Implications of Egypt’s Urgent Cabinet Reshuffle
Observers of Egypt are having difficult time understanding the motives behind the unforeseen cabinet reshuffle, that forced the members of parliament to cut their annual vacation to pass, in an emergency session on Saturday. A deeper look at the number of removed ministers, and the backgrounds of the new holders of their portfolios, could fairly explain the urgency of refreshing the government with some new faces.
Egyptians learnt about the cabinet reshuffle from a post by the Egyptian president, Abdel Fattah El-Sisi, on his Facebook page, where he noted that he summoned the lower house of parliament to urgently convene to “discuss amending a number of ministerial portfolios that has been replaced in consultation with the Prime Minister.” El-Sisi explained that the purpose of the change is to improve the performance of the government, and thus “protect state’s interests and competence in face of internal and external issues.”
The government of Prime Minister, Moustafa Madbouly, seems to be efficiently working with a steady rhythm, despite the obvious struggle to keep the boat afloat amidst the wind of the international economic crisis. The government of 33 ministers is dealing with a myriad of local, regional, and global crises that are simultaneously threatening Egypt’s national security and political stability. They range from the global food and energy crises that nobody can tell when they are going to end, up to the Nile River conflict with Ethiopia, that is posing a serious threat to Egypt’s water security and geographic consistency.
The generous backup support provided by the autonomous military-owned economic enterprises is keeping the street calm, while the civil government is focusing on pivoting the country out of these pressing crises. However, this inflexible mechanism of managing state economy cannot last for a long time. Sooner than later, the government is ought to secure stable and sustainable resources of income that enable the state to recover from the current crisis and harden its economic core against future punches by expected or unexpected domestic or foreign factors.
A few months ago, the Prime Minister announced an ambitious plan of macroeconomic reform that will open the Egyptian market to private investors and startup entrepreneurs, in an unprecedented way. The government aims to secure a total of 40 billion dollar in investments over the coming four years, through this program. However, this process is going to take time and a lot of work until it bears fruit. Patiently waiting for the fruit seems like a luxury that the Egyptian state cannot afford, right now.
The fastest, and perhaps the easiest, way for the Egyptian government to secure urgent money, at the time being, is to knock the doors of wealthy neighbors in the Arab Gulf region, and seeking a new loan from the International Monetary Fund (IMF). The Egyptian leadership followed a similar plan in 2016, which greatly contributed to getting Egypt out of a severe economic crisis at the time, and paved the way for the launch of many major national projects that the Egyptian leadership is now proud of. Egypt’s current fundraising campaign has been successful on the regional level, but relatively slow on the international level.
Over the past three months, Egypt has been aggressively signing investment agreements and memoranda with Arab Gulf countries. Saudi Arabia, Qatar, the United Arab Emirates (UAE), and Bahrain have pledged to pour tens of billions of dollars in short-term and medium-term investments that is believed to assure the Egyptian market, throughout the crisis. They have, also, credited generous deposits, in billions of dollars, at the Central Bank of Egypt (CBE), in order to enhance the foreign currency reserves and prevent the Egyptian pound from drastically collapsing against the dollar.
Nevertheless, the IMF is still giving Egypt a hard time by lingering the negotiations on a new loan, that mainly targets mitigating the consequences of the Russia-Ukraine war on the Egyptian economy. According to the Egyptian Minister of Finance, who was not touched by the recent cabinet reshuffle, there is a conflict of visions between the IMF and the Egyptian government regarding the pace and methodology of the prerequisite reforms. The IMF board, in late July, released a country assessment on Egypt that clearly asked the Egyptian government to take “decisive progress on deeper structural reforms that are needed to boost the economy’s competitiveness, improve governance, and strengthen its resilience against shocks.” The IMF is tying the release of the loan, which will be the third loan given to Egypt in the past six years, with accomplishing all of these reforms, as soon as possible.
That explains why Egypt had to conduct this urgent cabinet reshuffle that interchanged 40% (13 ministers) of Madbouly’s team, especially if we zoom in on the changes that happened – or did not – at the ministries with economic portfolios. The ministers of finance and planning remained in their positions, despite their obvious pitfalls. However, both of them are playing crucial roles in managing the ongoing talks with Gulf neighbors and the IMF regarding future financial aids and loans. Their removal, at this critical time, could have done more harm than good, by risking the loss of these important lenders and helpers, while having to restart the negotiations with new unfamiliar faces.
Meanwhile, the three economic portfolio keepers that got changed are from the ministries that the IMF is most concerned about reforming their performance. They are: Ministry of Public Enterprises, Ministry of Trade and Industry, Ministry of Military Production. Bringing fresh faces of technocrats, who have a strong economic expertise and mostly free from political biases, to lead these three ministries is an out loud message to the IMF that Egypt is keen on pursuing with structural and economic reforms as required.
It was also surprising to see that the Minister of Tourism was replaced by a prominent banker, who holds an executive position at one of the most successful private banks in Egypt, the Commercial International Bank of Egypt (CIB). Last month, the UAE paid 20 billion dollars for the acquisition of stakes in some successful Egyptian financial institutions, including the CIB.
The other changes were either minor or expected. By minor I mean that the assistant or advisor of the removed minister was upgraded to become the new minister, implying no big changes in policy to be expected. For example, that was the case in the ministries of education, irrigation, culture, and municipal development. Meanwhile, the changes that affected the ministries of health and immigration have already been expected, as the two former ministers have been idle for months due to personal complications that affected their productivity and reputation.
Long story short, this urgent cabinet reshuffle was essential to accelerate the negotiations with the International Monetary Fund and thus help the Egyptian government navigate its way out of the current crises. Yet, we have to wait and see if the new ministers, especially those holding economic portfolios, can actually succeed in this mission.
BY: Dalia Ziada