For Egypt’s Sisi, winning will be easier than fixing the economy

The men in a queue that spilled onto an Egyptian street in a photograph that began circulating on social media on Tuesday were not lining up to vote. Instead, according to the photographer, they were lining up to buy government-subsidized bread — a fact that made the image an apt metaphor for the challenge facing the election’s inevitable winner, former army commander Gen. Abdel Fattah El Sisi.

Voting was extended into a controversial and unscheduled third day on Wednesday as Sisi — the former defense minister who ousted President Mohamed Morsi last July in a coup that followed massive protests — sought to strengthen his mandate amid what seemed to be an alarmingly low turnout.

No matter the final numbers, which are likely to be subject to some dispute, an undercurrent of apathy and discontent evident in the electorate underscored the dangers facing the military man who has said it is his destiny to rule a country beset by the same deepening economic crisis that fueled the uprisings of 2011 and 2013.

Sisi is expected to easily beat his sole challenger — the charismatic but comparatively weak Nasserist Hamdeen Sabahi — with the Muslim Brotherhood, whose candidate won the last presidential election, having been banned after the coup. But once elected, he’ll inherit a fiscal Gordian knot.

Egypt’s budget deficit has nearly doubled since the uprising, and the current military-backed government is unable to pay for the fuel necessary to power electricity plants. To prevent its vital foreign currency reserves from slipping below emergency levels and to fund basic government projects, the country’s interim leadership has accepted more than $20 billion in aid from Gulf nations in less than a year. Many saw that aid as a product of Gulf rulers' antipathy toward the Brotherhood.

Restoring Egypt’s fiscal health, according to international bankers and lending agencies, requires slashing government spending and increasing revenue. But reforming the bloated public sector and corrupt subsidy system, and increasing taxes, could ignite the same social unrest that helped bring down Morsi and, before him, President Hosni Mubarak.

“What the uprising did, in my view, was really expose the major fault lines in the economy that were sort of papered over by the macroeconomic performance during the last five years of the Mubarak regime,” said Mohsin Khan, a senior fellow at the Atlantic Council’s Rafik Hariri Center for the Middle East and former director of the International Monetary Fund’s Middle East and Central Asia Department.

In television interviews before the election, Sisi’s economic policy was hard to pin down. He promised to improve living conditions for the poor and raise incomes but also warned that Egypt’s recovery would take years and that average citizens would have to endure a period of harsh austerity.

“The country will not make progress by using words,” he said at a March conference of young doctors. “It will make progress by working, and through perseverance, impartiality and altruism. Possibly one or two generations will [have to suffer] so that the remaining generations live.”

Alongside this talk of austerity and fiscal discipline, however, Sisi also seemed to echo the spirit of the epic statist visions of Egypt’s first military leader, Col. Gamal Abdel Nasser. Days before the election, his campaign released a document called “The Map of the Future,” which laid out a grand scheme for developing vast tracts of Egyptian desert.

It was a plan, Reuters reported, that had been developed for the Mubarak government in 1985 by geologist Farouk el-Baz. In 2005, a ministerial committee rejected the idea — which had included a railroad, eight-lane highway and new cities occupying some 10.5 million acres west of the Nile River — but Sisi has reportedly met with Baz to revive it.

Sisi’s version of the development would cost $140 billion, seven times the price of the plan rejected in 2005, and is even broader in scope, according to Reuters, requiring the construction of 48 new cities and eight airports. If such a project was rejected a decade ago, when access to international investment required neoliberal discipline, it's harder to imagine today, when Egypt has difficulties even keeping the lights on.

Egypt's official unemployment rate has risen from 9 percent before the uprising to 13 percent, according to the most recent figures, though analysts believe the true number to be higher. Prices of basic goods have gone up, and even residents of Cairo’s poshest districts contend with almost daily power cuts. Outside of the capital, in rural areas where basic plumbing remains a luxury, electricity sometimes shuts down for half a day.

The energy shortage also slows down Egypt’s factories, which Khan estimated are functioning at 60 or 70 percent of their usual capacity, reducing workers’ shifts and leading to job cuts.

The government, which has been paying foreign oil companies near market prices for fuel originally pumped in Egypt and then selling it to local power producers for lower, subsidized rates, now owes the foreign companies around $6 billion, Khan estimated.

Sisi will need to urgently address the energy crisis upon taking office, and that, according to Khan, will require more help from allies in Kuwait, Saudi Arabia and the United Arab Emirates, who are expected to pitch in many more billions of dollars in aid in the coming year.

The specter of a Muslim Brotherhood revival in the event of further economic decline will almost surely figure into their calculations.

“My sense is that … when the time comes and President Sisi goes to the Gulf, he will come back with more financing,” Khan said. “He would be arguing that ‘if I am not successful in turning the economy around, then there will be instability,’ and when he says instability, he means to imply that the Muslim Brotherhood will begin agitating and making life difficult.”

But even if Gulf financing puts a Band-Aid on Egypt’s economic pains, a long-term solution would likely require subsidy reform, higher taxes and bringing the price that local power companies pay for fuel in line with market rates. The interim government took initial steps in that direction when it increased the tax rate for Egyptians earning more than $140,000 per year, but Sisi will need a popular mandate to carry out the deeper reforms that will prove painful for most of the citizenry.

Egypt heavily subsidizes fuel, from diesel to cooking gas, as well as the flour that goes into government bread — massive expenditures that eat up 25 percent of the state budget.

"There's no ifs, ands or buts, the subsidy system has to be reformed in some way," Khan said.

But the issue is explosive, and no government since the uprising has made a real effort to touch what has become the third rail of Egyptian politics. The riots that rocked the country when the government unsuccessfully attempted to remove bread subsidies under an IMF plan in 1977 remain vivid in the popular imagination.

That concern may be fueling the anxiety of Sisi's supporters, who became jittery earlier this week when reports began describing low turnout over the first two days of voting. Journalists and independent observers reported empty polling stations across the country, and government-friendly media personalities took to the airwaves to bemoan the turnout figures and chastise Egyptians for staying home.

Still, Sisi probably won't face anything like the popular, state-supported anger that unseated Morsi, analysts said.

The Brotherhood — the only political movement conceivably capable of challenging the military — alienated potential allies through the Morsi administration's unyielding brand of majoritarian politics. Even if it were allowed to return to public life, it would find few friends.

But that doesn't mean that Sisi will govern capably, said Michael Hanna, a senior fellow at the Century Foundation.

The state's panic over initially low turnout numbers — and the potential for those numbers to stay low — raised "red flags" about the "fundamental competencies" of Sisi's campaign, which appeared either misinformed or incompetent, Hanna said. Neither is an encouraging sign for a team that is about to take over government in the midst of a security crackdown and regular terrorist attacks.

"To take on these really massive systemic problems that will entail some level of dislocation, you need broad-based consensus across the political spectrum," Hanna said. "So that is obviously lacking. There’s never been this degree of polarization."

The Brotherhood, which urged a boycott of the poll, vowed to reverse the coup through “innovative peaceful actions,” according to a statement on the group’s website.

In 2012, Morsi garnered 13 million votes in his victory over Mubarak-era Air Force officer Ahmed Shafik, and around 25 million people participated. In January, around 20 million people voted in a referendum to approve the post-Morsi interim constitution. If turnout in a vote largely seen as a referendum on Sisi is lower, it will cast doubt on the public consensus he claims in support of the violent transition he insists has been necessary to stabilize Egypt.

After the Presidential Election Commission announced an extra day of voting, Sabahi, Sisi's challenger, withdrew his campaign’s monitors from ballot stations and accused the government of trying to manipulate the numbers. If the final results appear suspicious, they could fuel a climate hostile to — and raise the political cost of — the painful economic reforms Sisi has warned are in the offing.

"I think confidence in the regime will erode, but I don’t as of yet see how it could be displaced," Hanna said.

Still, for Sisi, "there's nowhere to hide now," he said.