Columbia International Affairs Online: Working Papers

CIAO DATE: 01/2012

Challenges of Egypt's Economic Transition

Ibrahim Saif

November 2011

Carnegie Endowment for International Peace


The Egyptian economy is going through a critical period as the country transitions to democracy. While the shift from authoritarianism is certainly welcome, it has inevitably incited instability unknown to Egypt for the past thirty years. The implementation of economic reform amid this uncertainty is particularly challenging as political demands take precedence. The state attempted several times to revive the Egyptian economy since the Infitah, or “open door,” policy initiated by President Anwar Sadat in the mid-1970s. Successive, though unsuccessful, reform programs during the 1990s contributed to the pervasive poverty that served as a central driver of the 2011 Egyptian revolution and persists today. Past experiences can provide useful lessons for what to avoid in the future, even if they are unable to impart what exactly should be done. A successful transition to democracy can be facilitated by a sound economy and the economic well-being of citizens. Indeed, the transitional government led by the Supreme Council of the Armed Forces (SCAF) that is managing the country until the parliamentary and presidential elections are held is facing tremendous challenges. Yet it has unwisely rushed to fulfill the populist demands of the revolution with little consideration of their long-term effects. While perhaps politically expedient, reactive measures—such as the government’s recent increase in the public-sector minimum wage and the extension of fixed contracts to 450,000 public employees—are nonetheless placing added pressure on an already unsustainable budget deficit. Combined with the maintenance of economically inefficient subsidies, the long-term implications of continued poor economic policymaking will be severe.