Egypt

Egypt gained independence from the United Kingdom following the 1952 revolution by the ‘Free Officers’ led by General Gamal Abdel Nasser. Nasser ruled the country until 1970, followed by Anwar Sadat, whose assassination in 1981 gave way to Hosni Mubarak’s regime.[5Britannica, Egypt]

The Arab Spring of December 2010 eventually forced Mubarak to resign in February 2011. Grievances such as corruption, poverty and political oppression saw thousands of protesters in downtown Cairo and countrywide organise demonstrations. The Supreme Council of the Armed Forces eventually intervened, imposed martial law, suspended the Constitution and dissolved the People’s Assembly. A transitional body held the fort for six months in preparation for fresh elections.[6University of Illinois, Arab Spring: Egypt, University of Illinois LibGuides]

The process towards fresh elections was characterised by a series of controversial events until, in June 2012, Mohamed Morsi was declared president. His reign was turbulent and short-lived. In June 2013, the military temporarily suspended (and amended) the Constitution and relieved Morsi of the presidency.[7S Hamid, Order from chaos: The tragedy of Egypt’s Mohamed Morsi, Brookings, 19 June 2019]

In May 2014, Abdel Fattah Al-Sisi, a former general in the armed forces and minister of defence, resigned from the military to run in the election race and was declared winner. The elections were controversial, including his landslide win against his only opponent, leftist Hamdeen Sabahi.[8BBC, Egypt election: Sisi secures landslide win, BBC, 29 May 2014]

President Sisi has sought to restore law and order and has embarked on a broad range of economic reforms. His style of leadership has reduced the social turbulence that characterised the last decade but has also shrunk the democratic space in Egypt.[9Dawn, Analysis – Eight broken promises: Eight years after the coup, al-Sisi has failed the Egyptian people, Dawn, 10 August 2021] Controversial elections in 2018 saw him retain the presidency with 97% of the vote.[10J Davison and A Tolba, Egypt’s Sisi wins 97 percent in election with no real opposition, Reuters, 2 April 2018]

In 2019, further constitutional amendments were undertaken and have cemented the role of the military in politics and public life. Also, the presidential term limit was extended to six years, but reaffirmed the two-term limit. (Although one of the amendments in this section allows Sisi, already in his second term, to run for a third six-year term in 2024.) The position of vice-president was reconstituted. The president also appoints judges and one-third of the members of the new upper chamber (i.e. the senate).[11The Tahir Institute for Middle East Policy, TIMEP Brief: 2019 Constitutional Amendments, 17 April 2019; Human Rights Watch, Egypt: Constitutional Amendments Entrench Repression: Referendum Set in Grossly Unfree, Rights-Abusive Environment, 20 April 2016]

The security situation has remained fragile, however, especially in the Sinai Peninsula, despite large security efforts.[12G Aftandilian, Egypt’s Security Challenges in the Sinai Belie the Government’s Rhetoric, Arab Center Washington DC, 26 October 2017]

Nonetheless, the Government of Egypt (GoE) under Sisi has taken steps to restructure the economy, assisted by an International Monetary Fund (IMF)-induced reform package. It has passed laws to attract investment, introduced tax reforms, embarked on various austerity measures to rein in government expenditure, and on numerous large infrastructure projects to boost economic activity in the country.

Although the macroeconomic indicators have improved, the country still suffers from the impact of fiscal and monetary instability and is bogged down by the range of reform it has to pursue to unlock growth. Currency depreciation, inflation and budget deficits remain a challenge. Additionally, austerity measures such as cuts in subsidies and reduced spending on education and health pose challenges given Egypt’s rapid population growth, high levels of poverty and unemployment.[13BTI Transformation Index, Egypt Country Report 2020]

Sisi has placed a premium on economic growth[14Egypt today, 7 years under Sisi...Egypt’s economic reforms back national economy in face of challenges, egypt today, 22 June 2021] but the economy suffers under the inordinate role of the military in all aspects of life, monopolies/lack of competition and state control of the economy. The result is an inevitable cycle of protests and hard-handed reaction. [x]

Even though Egypt is divided into 27 governorates, the administrative structure is centralised with governors and other executive officials being appointed by the president and thus serving at his discretion. Decentralisation is thus limited to administrative functions without the devolution of any real decision-making powers as envisaged in the Constitution.

Instead, the country is strongly hierarchical with the presidency at the helm. Revenue collection, for example, is centralised, with over 90% of the revenue collected by the central government.[15European Committee of the Regions, Division of Powers, Egypt]

 Cairo 2050 development plan

According to the Polity IV index of regime type hosted by the Center for Systemic Peace, Egypt ranks as an anocracy or mixed regime. In 2017, the country scored -4 on the Polity IV composite index on a score ranging from -10 (a hereditary monarchy) to +10 (a consolidated multiparty democracy).[16The term ‘anocracy’ captures the extent to which a country in this range has both autocratic and democratic characteristics. A score of -10 generally indicates a hereditary monarchy and +10 a consolidated multiparty democracy. The three-part categorisation includes ‘autocracies’ (-10 to -6), ‘anocracies’ (-5 to +5 and three special values: -66, -77 and -88), and ‘democracies’ (+6 to +10).] Mixed regimes are inherently more unstable than a full autocracy or democracy because they have a combination of democratic and authoritarian components, reflecting weak institutions and personality politics that result in zero sum outcomes.[17P Regan and S Bell, Changing Lanes or Stuck in the Middle: Why Are Anocracies More Prone to Civil Wars? Department of Political Science, Binghamton University, 2009.]

Chart 4 below compares Egypt, other North African countries and the average of other lower middle-income countries (OLMICs) on the Polity IV index. Egypt’s score ranks close to Morocco and is significantly below the average for OLMICs.

When it comes to corruption, Egypt ranks 117th out of 180 countries with a score of 33 out of 100, according to Transparency International’s 2020 Corruption Perceptions Index. Compared to its North African neighbours, Egypt is more corrupt than Tunisia, Morocco and Algeria.[18Transparency International, Corruption Perceptions Index, 2020]

Baksheesh (meaning payment — such as a tip or bribe — to expedite service) remains a huge challenge to the economy and investment. A poor legal framework and abuse of office by public officials make enforcement quite difficult even within the existing legislation which criminalises corruption under Egyptian law.[19Risk & Compliance Portal, Egypt Corruption Report, July 2020]

Today, Egyptians generally associate the 2011/12 revolution with political instability and economic downturn,[20BTI Transformation Index, Egypt Country Report 2020] and achieving social equity and the general welfare of the population is their overriding priority. The level of trust in the government’s political and administrative system is low, and the government’s inability to deliver on major socio-economic issues for the population is slowly making its supporters passive and emboldening the stance of those opposed to the regime.[21BTI Transformation Index, Egypt Country Report 2020]

The following sections will analyse how Egypt’s governance and public policy choices have thus far influenced development sectors in population, education, health, basic infrastructure and agriculture.

Most of Egypt’s population lives in the urban agglomerations of Cairo and Alexandria, and rural areas along the Nile. The population density along the Nile is among the highest globally at more than 2 000 people per square kilometre. Other small communities are spread throughout the desert around the oases and historic trade routes.

Egypt’s population is currently estimated at 102.5 million, and by 2050, the country will have approximately 150 million people. This represents a 45.5% increase in the total number of people over the next 30 years. The country had an average population growth rate of 2.1% between 2010 and 2020, and is projected to average 1.3% between 2021 and 2050.

The population under 15 years old has been on an upward trend since 2008 and in 2020 accounted for nearly 34% of the population (34.7 million people). The proportion of this youthful and dependent population is expected to gradually decline to constitute 23% of the population, although the absolute number of people will remain fairly unchanged at 34.4 million by 2050.

The population aged between 15 and 29 years accounted for 24.5% of the population (25.2 million people) in 2020, and by 2050 will have slightly declined to account for about 23% of the population (34.9 million people). This relatively large youth bulge can increase the likelihood of instability if their needs are not accommodated.

About 36% of the population (37 million people) are aged between 30 and 64 years and by 2050 will account for nearly 43% (63.8 million) of Egypt’s total population. The ratio of people aged 65 years and over is relatively small at 5.5%. But by 2050 it will account for 10.8% of the population (16.1 million people) — double the current rate — and represent about 10.5 million more people in this age cohort than in 2020. Chart 5 summarises the population cohorts in Egypt to 2050.

Most of the population live in rural (57%) rather than urban centres (43%), but the urban population is expected to outnumber the rural population by 2041, with 69 million people[22URBANET, Urban Development in Egypt-Infographics, 22 October 2019] living in areas categorised as urban.

Only 13 of Egypt’s cities have a population of more than 300 000. Eleven of them have inhabitants of under 500 000, while the two largest cities, Alexandria and Cairo, have five million and 20 million people respectively. By 2030, Cairo is projected to have 25 million people.[23URBANET, Urban Development in Egypt-Infographics, 22 October 2019]

Egypt currently has an annual urban growth of 2%, meaning that Egyptian cities need to accommodate nearly one million additional people every year. Cairo alone saw 500 000 new inhabitants in 2017, making it the fastest growing city in the world.

In the Greater Cairo region, nearly two-thirds of the population lives in informal settlements characterised by poor urban planning and low levels of access to water and sewage amid increasing droughts because of climate change. As a result, Cairo is considered to be one of the most threatened cities globally, especially because Egypt is forecast to experience a critical water shortage by 2025.[24URBANET, Urban Development in Egypt-Infographics, 22 October 2019]

The continued rapid increase in Egypt’s population is a result of two things. First, high total fertility rates (TFR) in many parts of the country, particularly in the poorest governorates, are significantly higher than the national average of 3.2 children per woman of childbearing age. Most of these governorates are in rural Upper Egypt and informal settlements in cities.

A study by the United Nations (UN) Population Fund found that in 2018, fertility rates reached 2.75 in urban governorates, compared to 3.52 to 3.93 for both Upper Egypt and border governorates, respectively.[25H Sayed, Trends of Fertility Levels in Egypt in Recent Years, UNFPA, 12 September 2019]

Although the national TFR has been declining from the 1990s rate of five children per woman, it is still well above the rate needed to reach population stabilisation. In fact, between 2008 and 2014, Egypt’s TFR increased from three to 3.5 per woman.[26FP 2020, Egypt: Commitment Maker Since 2017] On the Current Path, Egypt is forecast to only achieve the replacement level of 2.1 children per woman by 2043.

Second is the phenomenon of population momentum since a large proportion of women are in their childbearing years. In Egypt, the total number of births is bound to increase even though the total number of children per woman of childbearing age is falling.[27M Khalifa, J DaVanzo and D Adamson, Population Growth in Egypt: A Continuing Policy Challenge, Santa Monica, CA: RAND Corporation, 2000]

Before 2000, contraception use had the largest suppressing effect on fertility. However, since then there has been no change in the impact of either the average age of marriage or contraception on fertility.

Findings suggest that access to labour market opportunities for well-educated women between 20 and 29 years could postpone the decision to have children.[28A Goujon and Z Al Zalak, Why Has Fertility Been Increasing in Egypt? Population et Sociétés; Bulletin Mensuel d'informations Démographiques, Économiques, Sociales, 551, 1–4, January 2018.]

The barriers to greater employment for women in Egypt include high cost of childcare and poor enforcement of anti-discriminatory laws.[29L Constant et al, Barriers to Employment That Women Face in Egypt: Policy Challenges and Considerations, Santa Monica, CA: RAND Corporation, 2020] In fact, many firms do not employ women because they do not want to give benefits like maternity leave and comply with legal frameworks that require an employer to have childcare when there are more than 90 female employees.[30A El-Haddad, 14 October Expert Workshop.]

A 2012 study estimated that if female employment rates were to match male employment rates in Egypt, the GDP would increase by 34%.[31Empowering the Third billion: Women and the World of Work, booz&co., 2012; World Bank, Women Economic Empowerment Study, May 2018]

Even after Egypt reaches the replacement level in 2043, population growth will continue for a number of years, albeit much slower. IFs projects that between 2043 and 2050, Egypt’s population will increase by about nine million people.

Rapid population growth as a result of high fertility rates and population momentum will have costly repercussions for Egypt’s economy and human development prospects. It inevitably contributes to the deterioration of quality of life in terms of health, nutrition, access to employment and other basic yet scarce commodities such as water regarding which Egypt already experiences stress.

Although Egypt has a strong family planning programme and lower rates of unmet contraceptive needs than most countries on the continent and in the MENA region, a considerable portion of Egyptian women still do not use or have access to modern contraception.

In 2014, unmet need for family planning was 12.6% and contraceptive use was 59%. In 2018, the overall prevalence rates of unmet need for family planning and contraceptive use in rural areas were estimated at 11.2% and 69.5% respectively. The total demand for family planning was 80.7%.[32R El-Masry et al, Unmet Need for Family Planning among Women in Rural Egypt, 2018, International Journal for Community Medicine and Public Health (IJCMPH), 5:4, doi]

Socio-economic factors are some of the reasons cited for women having unmet needs for family planning.[33R El-Masry et al, Unmet Need for Family Planning among Women in Rural Egypt, 2018, International Journal for Community Medicine and Public Health (IJCMPH), 5:4, doi: ] Some of the risk factors for unmet family planning needs include the perception that more than three children are ideal, lack of female empowerment with husbands still being the main decision makers and disapproving of family planning, and inadequate labour market opportunities for women.[34R El-Masry et al, Unmet Need for Family Planning among Women in Rural Egypt, 2018, International Journal for Community Medicine and Public Health (IJCMPH), 5:4, doi: ]

Finding the direct and indirect reasons hampering women from using modern contraception could help decision makers to address the challenge of overpopulation in the country and between regions.[35Probabilistic Population Projections based on the World Population Prospects: The 2015 Revision, New York, USA: United Nations, Department of Economic and Social Affairs (DESA), Population Division, 2015] Projections estimate that if use of modern contraception were to rise to 74.4% by 2030, TFR would decline to 2.1 children per woman by 2030.[36H Nassar and J Fouad, Family Planning in Egypt is a Financial Investment Benefit- Cost Analysis of Egypt Family Planning Program, 2014-2050, Center for Economic and Financial Research and Studies, Cairo University, 2015.]

Enabling women to make decisions on their reproductive health issues and preferences could reduce population growth by reducing unwanted pregnancies, increasing the age of women at first birth and spacing between births. However, the onus of family planning should not lie only with women.

Chart 8 showing the mix of modern contraceptive use in Egypt indicates that methods such as sterilisation are only undertaken by women. Shared effort on family planning between men and women would probably result in healthier families and lessen the pressure on environmental and public goods for the country.

Slowing down population growth would particularly reduce the number of child dependants (under 15 years old) and burden on the working-age population (people aged 15-65 years old). Currently, the dependency ratio in Egypt is 0.65 — meaning that for every 100 working people there are 65 dependants, which is better than the average for OLMICs in Africa and globally but is still high.

The IFs forecast shows the dependency ratio will slightly decline, and by 2040 Egypt will have a dependency ratio comparable to the OLMICs average. By 2050, Egypt’s dependency ratio will be lower (0.51) than the OLMICs average at 0.53.

For at least the next two decades, Egypt’s working-age population will be encumbered with the responsibility of providing basic needs for its relatively large portion of dependants. This means that most families have limited disposable income to save or invest in themselves and the economy.

Decreasing the rate of population growth can thus have positive socio-economic benefits in the form of a demographic dividend. This is defined as the economic growth that can result from shifts in a country’s population age structure when the working-age population is greater than the dependant population.

A demographic dividend or bonus (reliant on a healthy, and appropriately educated, population) can spur economic growth and create more job opportunities, thus reducing unemployment. In the long term, it can reduce the pressure on public goods and provision of basic services such as education, health and water.

Egypt experienced its first demographic dividend in 2010 when it reached a peak ratio of around 1.68 people of working age per dependant. This was slightly lower than the average peak of other North African countries at 1.97, and nearly 40% lower than the ratio experienced by China (2.7) and other Asian Tigers in the same period.

Egypt’s prospects for another demographic dividend have, however, been on the decline since 2011, and IFs projects that the country will achieve its next demographic bonus only from 2030 and peak at 1.92 and remain steady through 2050.

The decline in prospects for a demographic dividend is associated with Egypt’s fertility rate, which increased quite significantly between 2008 and 2014. The trend in increased fertility rates can in part be explained by the poor labour market situation for women[37E Radovich et al, Rising up: Fertility Trends in Egypt before and after the Revolution, PLoS ONE, 13:1, 2018, e0190148; A Goujon and Z Al Zalak, Why has Fertility Been Increasing in Egypt? Population et Sociétés; Bulletin Mensuel d'informations Démographiques, Économiques, Sociales, 551, 2018, 1–4; M Champion and T El-Tablawy, The Arab Spring’s Riskiest Legacy May Be Egypt’s Baby Boom, Bloomberg, 13 March 2018] and the unrest that accompanied the Arab Spring.[38E Radovich et al, Rising up: Fertility Trends in Egypt before and after the Revolution, PLoS ONE, 13:1, 2018, e0190148] If Egypt invests in quality healthcare, appropriate education and job creation, and manages to improve stability, it will benefit more from its favourable demographic structure in the long term.

Current population projections show that Egypt will continue to have a relatively high rate of population growth. Although family planning efforts have been successful in the past and Egypt has actually reduced its TFR, more needs to be done to ensure that the unmet need for contraception and choice of contraception, particularly among women, is met. Providing greater economic opportunities for women and reframing the population growth rate narrative as a shared responsibility between men and women could also hasten positive change in the country’s quest to reduce population growth.

The Government of Egypt should continue to make a push on its family planning prioritisation programme[39Egypt Prioritization Brief June 2019] if the country is to achieve other socio-economic development objectives related to its 2050 vision for the country.

Although the process of economic liberalisation in Egypt (infitāḥ) began in the early 1970s, most important sectors of the Egyptian economy remain under government control. However, concerted efforts since the 1980s to create a more resilient economy have gradually paid off. These include reduced defence expenditure and increased financing towards infrastructure projects, the development of the natural gas industry and greater foreign trade.[40Britannica, Egypt] By the late 1990s, Egypt was recording marked improvement in its per capita income, a trend likely to continue over the next 29 years.

The oil and gas industry has been a huge contributor to more rapid economic growth owing to discoveries of large oil fields and the establishment of a robust oil and gas industry with dynamic legislation. In fact, by the 1990s, the country was a strategic oil producer based on fields in four areas — the Gulf of Suez, Western Desert, Eastern Desert and Sinai.

By 1998, Egypt was producing 866 000 barrels of crude oil per day. Between 1999 and 2010, the total number of discoveries had reached 489, 311 of which indicated reserves of crude oil.[41Egypt Oil & Gas, More than A 100-year journey, Egypt Oil & Gas Newspaper, 29 December 2014] As of 2020, production of crude oil exceeded 65 000 barrels per day.[42R Mahmoud, Egypt announces record-high crude oil production for first time in decades, Al-Monitor, 22 September 2020] Egypt’s total proven reserves of 4.4 billion barrels of oil (BBOE) are expected to last the country 14 years at the 2016 rate of consumption. Proven gas reserves stand at 77 trillion cubic feet or 13 714.3 BBOE as of 2017 and are expected to last the country another 38 years at current consumption levels.[43Egypt Oil]

By 2011, the sector was growing at unprecedented levels. It constituted nearly 70% of Egypt’s foreign direct investment and contributed 16% of GDP, yet most Egyptians experienced shortages in gas, power and cooking fuel owing to inefficient and inadequate generation capacity amid rapidly rising demand.[44A Ismail, The Power Generation Crisis in Egypt, MEI@75, 3 September 2014]

Although the contribution of the hydrocarbon industry has not dominated Egypt’s GDP, it has been valuable as a foreign exchange earner. Despite significant production in the sector, Egypt became a net importer of both oil and gas in 2012. In fact, the low international oil and gas prices in recent years have upended the expectations of improved balance of payment and the anticipated positive economic results. This shows the extent to which Egypt is still relatively dependent on the oil and gas industry.

In addition, because the sector is capital-intensive it has contributed little to job creation. Consequently, Egypt’s high growth rates have been accompanied by a commensurate increase in unemployment — against a requirement for at least 600 000 additional jobs annually.[45A Adly, Egypt’s Oil Dependency and Political Discontent, Carnegie Middle East Center, 2 August 2016]

In a 2019 report, the IMF estimated that Egypt needed to create about 3.5 million jobs over the next five years to benefit from the potential of a demographic dividend and the required level of economic productivity.[46International Monetary Fund, Arab Republic of Egypt: Fifth Review under the Extended Arrangement under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for the Arab Republic of Egypt, 10 October 2019] In contrast, the precautionary measures to contain COVID-19 have resulted in a significant increase in unemployment since 2020, as reflected in the drop of per capita income in Chart 10.[47M Gad, Egypt: The Pandemic Experience in a Time of Reform, MEI@75, 30 March 2021]

Despite the projected positive trajectory in per capita income, the country’s economic prospects remain modest and living standards are generally low. The government has however scaled up its social safety programmes to ensure that its large vulnerable population does not slide into extreme poverty.

Egypt’s long-standing challenges have been further compounded by the COVID-19 pandemic. Due to slowed economic activity, the pandemic has worsened the high unemployment rate (from 7.7% in 2019 to 9.6% in 2020) especially in the formal sector, created a wider budget deficit, elevated debt-to-GDP ratio (projected at 90.2% of GDP in 2020 from 84.2% in 2019),[48Country Economy, Egypt National Debt] and a drop in foreign reserves, tourism, Suez Canal revenues and merchandise exports.[49World Bank, Egypt]

Despite the negative economic repercussions of COVID-19, Egypt’s growth has maintained a reduced but positive outlook unlike many countries globally that have recorded negative growth rates. In fact, in June 2021, the government announced that the country’s external debt had declined slightly for the first time in years.[50M Abu Zaid, Egypt’s external debt down to almost $111bn, Arab News, 2 September 2020]

Nonetheless, the country faces many economic vulnerabilities, particularly on issues related to subsidies and social protection programmes, improvement of job creation mechanisms, the business development environment and provision of equitable health services.

The size of Egypt’s economy was estimated at about US$348.8 billion in 2019 and US$361.2 billion in 2020. IFs estimates that by 2030, the economy will be approximately 53% larger at about US$562 billion and by 2050 reach nearly US$1.33 trillion, 3.5 times more than in 2020.

The service industry comprises the largest sector at about 50% of GDP and is forecast to continue to contribute the largest share to Egypt’s GDP. It employs nearly half of the population and is dominated by telecommunications and tourism.

The service surplus revenue has declined from US$13 billion to US$9 billion (a 31.2% drop) due to the COVID-19 pandemic. The tourism sector has borne the brunt of this decline with reductions of up to 54.9% in travel receipts between January and June 2020, and upwards of US$7.7 billion in 2020.[51Egypt Independent, CBE: Egypt’s tourism revenues fell by 67.4% in 2020–2021, Egypt Independent, 30 June 2021]

Manufacturing makes the second largest contribution to Egypt’s GDP at about 17.1%. It is followed by the agriculture sector at about 12.1% of GDP. Agriculture’s contribution to the economy is projected to decline in the forecast horizon to roughly 3.6% by 2050 as Egypt’s economy shifts to higher value-added sectors.

According to IFs classification of sectors, information and communications technology (ICT) currently contributes about 7.6% to GDP and by 2050 will contribute about 9% of GDP. The energy sector contributes a meagre 4.7% of GDP and by 2050 will contribute only about 2% of GDP. Finally, materials contribute about 1.8% of GDP and will increase slightly to 3.3% of GDP by 2050.

Egypt also has a huge informal sector that is estimated to constitute over 50% of GDP.[52World Bank, Egypt: World Bank Issues Brief No. 2, Informal is the new normal. Egypt’s Informal Sector is on the Rise, but careful Regulatory Innovation Can Help Turn the Tide; Egyptian Center for Economic Studies, Views on News: Views on the Crisis: The Informal Sector, Issue 7, April 2020] Because it is not as oil-rich as most Gulf countries, Egypt relies heavily on the informal economy and remittances from abroad (mostly from the Gulf nations).

The informal sector is estimated to provide about 68%–70% of new jobs and increases by 1% every year relative to the formal economy.[53M Soliman, Egypt’s Informal Economy: An Ongoing Cause for Social Unrest, SIPA, Journal of International Affairs, 29 October 2020] A World Bank analysis shows that Egyptian workers crave stability and job security, but most jobs lack any written contracts or social insurance. Most workers indicate that they are willing to work for even 20% lower wages in the formal private sector given the job security that comes with formal sector employment as opposed to employment in the informal economy.[54World Bank, Egypt: World Bank Issues Brief No. 2, Informal is the new normal. Egypt’s Informal Sector is on the Rise, but careful Regulatory Innovation Can Help Turn the Tide]

The informal sector challenge is two-fold: the country has many small unproductive firms that are not capable of offering formal employment to absorb the huge working population in Egypt. But the large firms do not offer formal jobs either. Only about half of employees in such firms have contracts and social insurance.[55World Bank, Egypt: World Bank Issues Brief No. 2, Informal is the new normal. Egypt’s Informal Sector is on the Rise, but Careful Regulatory Innovation Can Help Turn the Tide] In fact, Egypt ranks in the top ten worst countries for working people at position five (out of 149 countries) in the International Trade Union Confederation’s (ITUC) Global Rights Index report of 2021.[56ITUC, 2021 ITUC Global Rights Index: COVID-19 pandemic puts spotlight on workers’ rights, 30 June 2021]

Together with its large youth bulge, the survivalist employment in the informal economy could be a key driver for socio-economic unrest. In addition, reduction in worker remittances from the Gulf states owing to geopolitical and economic issues would also probably increase the risk of instability.[57M Soliman, Egypt’s Informal Economy: An Ongoing Cause for Social Unrest, SIPA, Journal of International Affairs, 29 October 2020]

The expansion of the informal economy in Egypt and much of the Arab world is generally a manifestation of the economic and social marginalisation suffered by a majority of the population.[58A Adly, Informal Economy in Egypt: Realities of Marginalization and Illusions of Empowerment, Assafir-al-Arabi, 21 August 2019] Because informality is also associated with low levels of development and standards of life, Egypt should incentivise the formalisation of the economy by reducing the associated costs and hurdles, especially for small firms.[59Adly, Informal Economy in Egypt: Realities of Marginalization and Illusions of Empowerment, Assafir-al-Arabi, 21 August 2019]

Most of the poor and vulnerable population lives in the governorates of Upper Egypt. The Government of Egypt is committed to its Haya Karima (Decent Life) initiative to accelerate poverty reduction, particularly in rural areas. As such, poverty at the national poverty threshold (E£736 per capita per month or US$3.80 per day in 2011 US$[60World Bank, Poverty & Equity Brief, Middle East & North Africa, Arab Republic of Egypt, April 2020]) declined to 29.7% in 2020 down from 32.5% in 2018.[61Ministry of Planning and Economic Development, Egypt’s 2021 Voluntary National Review, 2030 Vision of Egypt]

On the US$1.90 extreme poverty threshold, 2018 data in IFs shows that about 3.8% of the population were destitute and this represented roughly 3.8 million people in that year. On the US$3.20 extreme poverty level used for lower middle-income countries, approximately 22% of the population lives in extreme poverty, equivalent to nearly 23 million people. This means a larger portion of Egyptians live just below the US$3.20 extreme poverty line.

Owing to the effects of the pandemic and challenges related to a rapid population increase in Egypt, IFs projects that poverty will increase slightly only to return to its pre-COVID-19 rate in 2028 and then steadily decline afterwards. Therefore, in the short and medium terms, targeted social programmes are an essential component in the poverty reduction strategy.

Aside from income poverty, Egypt also experiences multidimensional poverty. Although Egypt’s position has improved in the Global Multidimensional Poverty Index of 2020, it still has gaps in nutrition, school attendance, years of schooling, housing and even sanitation. Roughly 6.1% of the population is categorised as vulnerable and 0.6% are in severe poverty, with these figures disproportionately affecting those in rural areas.[62Oxford Poverty and Human Development Initiative, Global MPI Country Briefing 2020: Egypt (Arab States), July 2020]

When it comes to income inequality, studies indicate that the level of inequality in the country is probably underestimated and if left unaddressed could fuel social unrest and instability.[63A Abdel Ghafar, Causes and Consequences of Inequality in Egypt, The Muslim World, 111:1, 5–26, 2021] This is particularly so because the size of Egypt’s youth bulge (per cent of the population aged 15 to 29 relative to the adult population), which is currently declining, is set to increase from 2024 for another 15 years.

Regional inequalities and disparities also persist. The government reported that between the FY 2017/18 and 2019/20, household income in urban areas grew by 16% compared to 13% in rural areas. However, poverty rates in rural areas dropped faster than in urban areas, pointing to income polarisation and the difference in how people in rural and urban areas experience poverty.[64Ministry of Planning and Economic Development, Egypt’s 2021 Voluntary National Review, 2030 Vision of Egypt]

To reduce income inequality, the Government of Egypt has undertaken policies related to subsidies (in particular food subsidies), increasing the minimum wage and introducing progressive taxation to reduce inequality in the country. Also, efforts to promote localised development in regions and inclusiveness in government opportunities, including to encourage gender equality, are some actions being pursued by the country.[65Ministry of Planning and Economic Development, Egypt’s 2021 Voluntary National Review, 2030 Vision of Egypt]

According to the UN Conference on Trade and Development (UNCTAD) 2020 World Investment Report, Egypt was the largest recipient of foreign direct investment (FDI) in Africa in 2019. It increased by 11% from the previous year to US$9 billion.

The increase can be attributed to economic reforms that improved macroeconomic stability and strengthened investor confidence in the country. In the World Bank’s 2020 report on Ease of Doing Business, Egypt improved its rank to 114 (out of 190) from position 120 in 2019.[66World Bank Group, Doing Business report] Most FDI still goes to the oil and gas industry, although investments have been made in the non-oil economy as well as in telecommunication, consumer goods and real estate[67UNCTAD, World Investment Report 2020] such as the construction of the new capital city east of Cairo.[68Reuters, Egypt prepares to start move to new capital, away from the chaos of Cairo, Daily Maverick, 17 March 2021]

In addition, Egypt has seen sizable foreign funding in major infrastructure projects. For example, Egypt’s first nuclear project was set at US$25 billion, with most funding sourced from Russia.[69SAIIA, Egypt’s Quest for a Nuclear Future, 21 January 2021; G Mikhail, Egypt postpones nuclear power plant amid tensions with Russia over Nile dam, 28 July 2021] Investors from the Gulf Cooperation Council states,[70Reuters, Egypt prepares to start move to new capital, away from the chaos of Cairo, Daily Maverick, 17 March 2021, March 2021.] Asia (mostly China) and Europe are also investing in projects ranging from rail to oil.[71Global Capital, Egypt: a magnet for foreign investment, Global Capital, 30 September 2020]

Egypt should make an effort to attract more FDI to other sectors like manufacturing to diversify and improve the value content of its exports and improve productivity and labour market outcomes, and thus avoid its recurring growth slowdowns.

Egypt is one of the leading labour exporting countries globally, and migrant remittances have been one of its main sources of external finance.[72R Qutb, Migrants’ Remittances and Economic Growth in Egypt: An Empirical Analysis from 1980 to 2017, Review of Economics and Political Science, 2021] In 2018, remittances were the second largest factor in reducing the country’s current account deficit, as they increased by US$3 billion between 2017 and 2018.[73I R Qutb, Migrants’ Remittances and Economic Growth in Egypt: An Empirical Analysis from 1980 to 2017, Review of Economics and Political Science, 2021]

According to the Central Bank of Egypt, between January and September, 2020 Egyptian remittances (from abroad) increased by 11.6% compared to the previous year to reach US$22.1 billion. This increase is also linked to the liberalisation of the country’s exchange rate and makes a significant contribution to Egypt’s cash reserves. COVID-19 has, however, seen Egypt’s cash reserves dwindle as investors reduce their exposure to emerging markets, on top of the decline in tourism due to COVID-19 restrictions.[74M Abu Zaid, Egyptian remittances up 11.6% in first 9 months of 2020, Arab News, 9 December 2020]

Although remittances are the second highest source of income after labour income for Egyptian households, most of it is used for daily household consumption expenses. In this way, remittances alleviate poverty, improve the overall welfare of Egyptians and indirectly impact the economy through increased consumption.

However, increased consumption in relation to investment has a negative long-term impact on economic growth. There is a clear opportunity for the Government of Egypt to encourage its expatriate community to invest in the economy through the establishment of diaspora bonds, as done by countries as diverse as Israel, India, Nigeria and Ethiopia, and to provide opportunities for small-scale investors.[75R Qutb, Migrants’ Remittances and Economic Growth in Egypt: An Empirical Analysis from 1980 to 2017, Review of Economics and Political Science, 2021]

According to Observatory of Economic Complexity data, in 2019 Egypt exported goods worth US$36.7 billion and imported about US$82.5 billion, recording a large negative trade balance, thus making it a net importer. Its largest exports were petroleum products, gold and nitrogenous fertilisers, while its top three imports were refined petroleum, wheat and cars. In fact, in 2019 Egypt was the world’s largest importer of wheat. Top trading partners are the United States (US), United Arab Emirates (UAE), Saudi Arabia, Italy, Turkey, China, Russia and Germany.

Egypt’s trading partners reveal its poor trade relationship with the North African and Maghreb bloc, as well as the rest of sub-Saharan Africa. Egypt has long recognised the need for greater trade integration on the continent and has signed the Tripartite Free Trade Area (TFTA) that seeks to facilitate movement of goods (largely on a tariff framework) among the signatory country territories.

The TFTA would essentially integrate three existing African trading blocs — the East African Community, the Southern African Development Community and the Common Market for Eastern and Southern Africa. This deal would harmonise trade in the three regions and eliminate overlapping trade rules to reduce the cost of doing business.[76M Ngwato, Leaders sign historic ‘Cape to Cairo’ free trade deal, 19 May 2020, ]

Egypt has also ratified its membership to the African Continental Free Trade Area (AfCFTA) agreement, and it is expected that this trade agreement would allow and facilitate the entry of Egyptian goods into the sub-Saharan market.[77S Al-Aees, AfCFTA opens African markets to Egyptian products, Daily News Egypt, 2 January 2021]

The AfCFTA deal offers significant opportunities for Egypt, which has established itself as an exporter of oil and mineral-related manufactured goods such as cement to Ethiopia and Kenya, in addition to agricultural and food products. It could help Egypt increase its trade volume with Africa, which currently stands at 3% of its total trade volume, particularly with sub-Saharan Africa, which has a large market size and currently constitutes only a fraction of Egyptian exports.[78Oxford Business Group, New Egyptian trade deal could boost regional economies]

With regard to the trilateral cooperation, most recently Egypt, Jordan and Iraq have agreed to improve the mobilisation of resources and the implementation of practical programmes in the areas of common challenges, especially on climate change, food security and livelihoods.[79Iraq News, In light of the Trilateral Summit, Iraq signs an agreement without Jordan and Egypt, Iraq News, August 2021, ] 

Modern education was introduced in Egypt during the 1800s under Ottoman Muhammad Ali Pasha, who commenced a dual education system. One served the population attending traditional Islamic schools (kuttab), and another called madrasa (Arabic for ‘school’) serving elite civil servants. Training on vocational skills was passed on by means of informal apprenticeships. However, the sector suffered significant neglect and disruption under British colonial occupation.[80Y Maman and J Falah, “Education Ltd.”—The Influence of British Earl of Cromer on the Education System in Egypt (1883–1907), Advances in Historical Studies, 7, 2018, 79–96, doi: 10.4236/ahs.2018.72006.]

As a result of many educational initiatives and reforms since independence, the education system has made significant strides with improved educational outcomes over the past decades. The mean years of education for people aged 25 and above is almost a year higher than the average for OLMICs. The literacy rate stood at approximately 74% in 2020, while the number of elementary-age out-of-school children has dropped after skyrocketing following the 2011 revolution.

However, World Bank data shows a gradual increase in the number of out-of-school children between 2014 and 2019. In fact, in this period, the number of out-of-school children increased from 44 389 to 90 674, respectively. It is likely that with the COVID-19 pandemic, the current number of out-of-school children is much higher.[81World Bank, Children out of school, primary - Egypt, Arab Rep]

The public education system in Egypt consists of four stages of learning. The basic and compulsory education stage for children between four and 14 years comprises kindergarten for two years followed by primary school for six years and preparatory school (ISCED Level 2) for three years. Then, the secondary school (ISCED Level 3) stage is for three years, for ages 14/15 to 17, followed by the tertiary level.

Despite many initiatives, including compulsory education, the sector still faces numerous challenges. Key among these is Egypt’s rapid population growth, whose ramifications have been borne in the education sector through sharp increases and demand for enrolment both at primary and secondary level. This means greater funding requirements, capacity shortages and overcrowded learning facilities, particularly in denser regions like Cairo, Alexandria and Giza.[82World Bank, Children out of school, primary - Egypt, Arab Rep]

Although the teacher-student ratio has risen in the past few years, teacher salaries have fallen; in 2017, the average teacher salary was about E£86 000 (US$4 800). This is just 1.3 times the average GDP per capita of Egypt and way below the World Bank-recommended average teacher salary of three to 3.5 times the GDP per capita for a productive education system.[83D Evans et al, Teacher Pay in Africa: Evidence from 15 Countries, Policy Research Working Paper 9358, World Bank]

Due to the inadequacy of the education system, many skilled teachers have turned to private tutoring, which pays better than the public education system. An estimated 42% of household income is spent on after-school tutoring, but some learners drop out of school because they cannot afford to sustainably access supplementary tutoring.[84D Johnson, Egypt’s long road to education reform, The Tahrir Institute for Middle East Policy, 10 February 2018] An estimated 30% of school children in Egypt, mostly living in rural areas, are considered to lack basic reading and writing skills.[85RY Mohamed, M Skinner and S Trines, Education in Egypt, World Education News + Reviews, 21 February 2019, https://wenr.wes.org/2019/02/education-in-egypt-2]

As a result, the World Economic Forum’s Global Competitiveness Report for 2017/18 ranked Egypt’s quality of primary education at position 133 out of 137 countries — only two positions ahead of war-ravaged Yemen. The number and availability of qualified teachers and desire for teacher training and deployment into public schools is dropping and will continue to do so if the issue of teacher remuneration is not addressed.[86RY Mohamed, M Skinner and S Trines, Education in Egypt, World Education News + Reviews, 21 February 2019]

Compared to other North African countries like Tunisia and Algeria, it is clear that Egypt’s education system is lagging and that bottlenecks have emerged, particularly at lower secondary and tertiary level. Chart 18 shows Egypt’s performance at various educational stages in comparison with Algeria and Tunisia, also both lower middle-income countries in North Africa, and OLMICs globally. It is colour coded in a traffic light system, with red indicating poor performance, intermediate performance between amber and yellow and good performance in green.

The education system can thus be conceptualised as a ladder where learners advance from kindergarten (not shown in IFs) to primary, secondary and tertiary level (i.e. completion of one level enables transition to the subsequent level). The more pupils a country can enrol in primary school, the larger the pool of learners who can graduate and transition to secondary and tertiary level.

A good foundation right from kindergarten is crucial to future learning success. As such, any blockages in the system affect attainment of subsequent levels of education. This can be observed in Egypt’s lower secondary and tertiary outcomes.

Although Egypt performs relatively well at primary and upper secondary levels, tertiary outcomes perform quite poorly relative to the comparison countries and groups. This is particularly problematic given Egypt’s population crisis and the expectation that tertiary enrolment and graduation would be high to absorb and produce skilled graduates. As a result, the quality of education is also affected. In fact, the Global Competitiveness Report for 2017/18 ranked Egypt’s quality of tertiary education at a lowly 130th out of 137 countries.[87World Economic Forum, The Global Competitiveness Report 2017–18]

Underfunding, inefficiency and outdated curricula are some of the key challenges in the higher education system in Egypt. This amid mounting criticism of a system that churns out graduates without the appropriate and necessary skills for employment in a modern economy. In fact, despite high unemployment rates, many skilled jobs remain unfilled because graduates do not have the technical and soft skills required to execute such jobs.[88S Devarajan, The Paradox of Higher Education in MENA, Brookings, 27 June 2016] In 2015, learners burnt their higher education degrees in protest of joblessness, showing the gravity of the problem.[89N Habibi and F El Hamidi, Why are Egyptian Youth Burning Their University Diplomas? The Overeducation Crisis in Egypt, Brandeis University, Working Paper No. 102, 2016]

Vocational training has always been a large part of Egypt’s education system. Under Mubarak, one of the best-known schemes — originally called the Mubarak-Kohl Initiative, now known as the dual system — was launched in 1994 by the Ministry of Education and the Deutsche Gesellschaft für Internationale Zusammenarbeit to promote technical training.[90A Adams, The Mubarak Kohl Initiative – Dual System in Egypt: An assessment of its impact on the school to work transition, MKI Vocational Education Training and Employment Programme, Cairo, 2010]

Since 2015, other technical and vocational education and training (TVET) schemes such as the ‘Integrated TVET scheme’ and ‘Life-long learning’ (Oumal System) have been rolled out by the government, with a strong emphasis on apprenticeship. Although these efforts have scaled up TVET programmes, increased training opportunities are still needed in Egypt. The government envisions a 50% increase in the dual education system in all schools by 2025. This would be a huge increase in the number of trainees undergoing TVET training.[91Oxford Business Group, Egypt takes steps to reform vocational training in education sector to better match market needs]

Egypt’s government is aware of the need for reforms in the education sector, especially in light of youth unemployment and the associated propensity for political instability. Sisi declared 2019 as ‘the year of education’ and increased public education spending by 8% in the 2018/19 financial year.[92Oxford Business Group, How will Egypt reform its education system?]

In the 2020/21 financial year, the government budgeted for 6% of GDP towards the education sector.[93Egypt today, Egypt spent LE 896.1 billion on education this decade: Official statistical agency, egypt today, 25 September 2020] The country’s strategic vision for education to 2030 seeks to increase funding and boost tertiary enrolment, improve teacher–student ratio, quality and accreditation mechanisms, reform curriculum to match labour market needs and expand TVET programmes.[94RY Mohamed, M Skinner and S Trines, Education in Egypt, World Education News + Reviews, 21 February 2019]

In its effort to expand capacity in the tertiary sector, Egypt has successfully sought to establish itself as a major higher learning destination (after Saudi Arabia and the UAE in the Arab world). It has attracted many foreign learners from the MENA region and sub-Saharan Africa. Low tuition, living expenses and free admission of non-citizens and international partnerships and scholarships are some of the incentives fuelling Egypt’s attraction as an education hub.

The country also hosts many reputable international universities like the American University in Cairo, the German University in Cairo, the British University in Egypt, and the Université Française d’Egypte. Furthermore, in 2018, Egypt enacted legislation to attract more international universities to establish their foreign branches in the country with more streamlined licensing procedures, affordable real estate, tax breaks and requirements to teach the same programmes as in their home countries.[95RY Mohamed, M Skinner and S Trines, Education in Egypt, World Education News + Reviews, 21 February 2019]

These policies are meant to enhance the global competitiveness of Egypt’s education system, increase capacity and intake, enhance performance of domestic universities by increasing competition, foster research collaboration and inbound student mobility, and ultimately improve the stock of human capital in the country.[96RY Mohamed, M Skinner and S Trines, Education in Egypt, World Education News + Reviews, 21 February 2019]

The government is seemingly aware of the challenges and opportunities that exist in the education sector. Owing to the protracted period of time it generally takes for the impact of formal education to manifest and change the structure of an economy, speedy action is required to fix and transform the country’s education problems.

Egypt’s health indicators have improved significantly since 1960 and the current health profile largely mirrors that of developed countries. Some of the key accomplishments include a drastic decrease in rates of maternal and child deaths and chronic malnutrition. They also include the elimination of diseases like polio in 2006 and the establishment of a community health worker programme as a primary foundation towards equity in the provision of healthcare services.[97USAID, Egypt, Global Health]

Egypt’s commitment to developing its healthcare has ensured that nearly 95% of the population lives within a 5 km radius of a health facility, family planning services have expanded to over 50% of primary care facilities, and the government has adopted a national plan for family planning. It has also implemented the Social Health Insurance law towards universal health coverage for its population.[98World Health Organization, Egypt, Country Cooperation Strategy at a glance]

The success of Egypt’s long-running reforms has manifested in reduced incidents of communicable diseases, longer life expectancy of about 72.7 years (projected to reach 77 years by 2050) and economic benefits such as increased household incomes.

The country has essentially met the Sustainable Development Goal (SDG) of reducing child and neonatal deaths to at least 25 and 12 deaths per 1 000 live births. Maternal mortality was 37 per 100 000 births in 2017[99World Health Organization, Maternal mortality in 2000–2017] and by 2030 it is projected at three per 100 000 births. Egypt has essentially met the global target of fewer than 70 deaths per 100 000 live births.[100United Nations, Department of Economic and Social Affairs, Sustainable Development]

However, alongside the successes, a range of other health issues plague Egypt’s ambition of an efficient health system beyond primary care services. Some of the challenges include population pressure and the impact of an increase in the total fertility rate since 2008, which do not bode well for the health system in terms of the demand for services and expenditure that will be required.

Furthermore, due to urbanisation and a rise in disposable income, Egypt faces a high prevalence of non-communicable diseases (NCDs) like cardio-vascular-related illnesses, strokes, cancer, diabetes, respiratory infections[101Centers for Disease Control and Prevention (CDC), Global Health – Egypt, ] and other lifestyle diseases that are inherently more expensive to treat.

According to the international classification of diseases (ICD), NCDs have been on the rise in Egypt, particularly since 1990, and are forecast to remain the leading causes of deaths in the country well beyond 2050. The World Health Organization estimates that more than 85% of total deaths in Egypt are caused by NCDs, and this is exacerbated by the prevalence of other behavioural and biological risk factors like smoking, unhealthy diets, physical inactivity, obesity and hypertension.[102World Health Organization, Egypt, Country Cooperation Strategy at a glance; Egypt Action Plan For NCDS 2018–2022]

Smoking for example is widespread, with roughly 20% of the population using tobacco products daily.[103S Fouda et al, Tobacco Smoking in Egypt: A Scoping Literature Review of Its Epidemiology and Control Measures, Eastern Mediterranean Health Journal, 24:2, 2018, 198–215, PMID: 29748949.] A study conducted in 2010 showed that raising the average cigarette tax to £E4.08 per pack (US$0.23, 70% of the retail price) could prevent over 600 000 premature deaths in current and future smokers and raise cigarette tax revenues by almost £E5.2 billion (US$294 million).[104K Hanafy et al, The Economics of Tobacco and Tobacco Taxation in Egypt, Paris: International Union Against Tuberculosis and Lung Disease, 2010.]

The NCD death rate (per 1 000 people) in Egypt is currently more or less on par with the global average for OLMICs, but it will surpass the OLMICs average by around 2033. However, the NCD death rate in Egypt is significantly higher than the average of other lower middle-income countries in Africa, as shown in Chart 20, which includes a forecast of death rates by main ICD categories to 2050.

In 2015, it was reported that the prevalence of diabetes was 16.7% in people between the ages of 20 and 79, representing 7.8 million cases at the time. Obesity among adults was over 33% higher than in some developed countries and one of the highest in the MENA region. The rate of hypertension among adults stood at nearly 25%, one of the highest in the world.[105Colliers, The Pulse: 7th Edition 2017, Egypt Healthcare, 20 September 2017]

The increase in NCDs is particularly alarming in light of the infrastructural, funding and management challenges faced by the country’s health system. In 2016, it was estimated that Egypt had only 1.5 beds per 1 000 people relative to the global average of 2.7 per 1 000 people. Only about 57% of the population was insured, mainly with two public insurance companies.

Services in the public health sector are generally of low quality due to underfunding, lack of medical equipment and qualified personnel, poor sanitation and safety measures (especially in rural areas). Because of this it is expected that the private sector will be encouraged to take a leading role in providing health services to keep up with the healthcare demands of the country’s large and growing population.[106Colliers, The Pulse: 7th Edition 2017, Egypt Healthcare, 20 September 2017]

Egypt’s healthcare spending has been rising since 2010 but fluctuated after 2018 (Chart 21 shows the trend since 2000). The government has indicated that health spending will constitute 3% of GDP in the FY 2020/21.[107Daily News Egypt, Egypt’s health spending up to 3% of GDP in FY 2020/21: Maait, Daily News Egypt, 14 September 2020]

However, invariably the level of health spending in itself does not lead to tangible improvements. Although a large portion of health spending is directed toward salaries and wages, healthcare workers often hold more than one job at a time to make a decent income.[108Egyptian Initiative for Personal Rights, Challenges Facing Health Expenditure in Egypt: Report on the Proceedings of a Roundtable Discussion, Health and Human Rights Program Egyptian Initiative for Personal Rights September 2009]

As a result of the system’s inadequacies, Egypt has been facing an unprecedented emigration of its doctors. The Egyptian Medical Syndicate estimates that between 2016 and 2019, out of the 220 000 registered doctors, 110 000 left the country. This means that Egypt has only 10 doctors per 10 000 people, trailing the global average of 32 per 10 000 people.[109T Abd El-Galil, Egypt’s Doctors are Fleeing, Leaving Behind a Physician Shortage, Al-Fanar Media, 29 July 2019]

The COVID-19 pandemic has further strained and exposed a struggling health system. The World Bank has provided financial assistance to support the country’s COVID-19 Emergency Response project[110World Bank, Egypt: World Bank provides US$ 50 million in support of coronavirus emergency response under new fast-track facility, 17 May 2020] and the implementation of its Universal Health Insurance System.[111Egyptian Streets, World Bank to Provide US$400 M to Support Egypt’s Universal Health Insurance System Implementation, 17 June 2020; A Adib and M El Alaily, Egypt: Universal Health Insurance Law, June 2020]

The implementation of the Universal Health Insurance Law, family practice programmes and other efforts to bridge the public-private gap will make healthcare accessible and equitable to all. However continued and even greater effort to reform the sector should be a top priority for the national social development agenda.

Basic infrastructure discussed in this section includes access to water and sanitation, electricity, roads and ICT.

According to the Africa Infrastructure Development Index (AIDI) of 2020, Egypt (with a score of 88.39) ranks second after Seychelles (96.73) in infrastructure development. AIDI consists of four composite indicators — transport, electricity, ICT and water supply and sanitation needs.[112Africa Infrastructure Knowledge Program, Africa Infrastructure Development Index (AIDI)] Although Egypt has made significant strides in improving the quality and quantity of basic infrastructure, the country’s infrastructure stock is limited and aged.

The sector also faces low levels of investment. An Organisation for Economic Co-operation and Development report estimates that for the country to meet its investment gap, it would need to dedicate about 5% of GDP to this sector until 2040 to adequately improve its infrastructure connectivity.[113OECD Investment Policy Reviews: Egypt 2020, Chapter 8. Infrastructure connectivity] In light of rapid population growth and the accompanying demand, infrastructure development is an essential and critical aspect to enhancing productivity and sustainable long-term growth in Egypt.

Beyond the basic infrastructure components outlined, the construction sector is projected to achieve 9% growth between 2020 and 2024. Real estate, long considered a preferred destination for investment in the country, has maintained strong growth. The growth is mainly driven by public-private partnerships, and largely skewed towards high-income buyers.

Nonetheless, Egypt’s government is a massive investor in the construction industry. It is building smaller and more affordable housing units primarily targeted at poor and low middle-income groups to provide the 12–20 million Egyptians estimated to live in informal settlements with decent housing.

In addition, the government is planning to build 14 new smart cities and is currently in the process of building a new administrative capital 35 km east of Cairo. This city was expected to house all government ministries and authorities by 2021. Other upgrades on airports, ports, railway and transportation networks are also planned throughout the country.[114International Trade Administration, Egypt – Country Commercial Guide, 5 September 2020; Oxford Business Group, Investments in Egypt’s large-scale infrastructure build medium-term confidence, Egypt, Construction]

Water

The Nile Basin is Egypt’s largest water source, with an allocated annual flow of 55.5 billion cubic metres, according to the Nile Waters Agreement of 1959. Ground and surface water sources account for about 0.5 billion cubic metres. The Nubian Sandstone Aquifer System in the Western Desert is also an important water source, but this is fossil groundwater which comes with the risk of contamination.[115Water Action Hub, Egypt, Africa]

Egypt requires about 90 billion cubic metres of water annually to meet its national needs and at the current water supply records a deficit of about 34 billion cubic metres. In 2018, the annual per capita share of water declined to 570 m³ which is below the set international standard of 1 000 m³.[116Ministry of Planning and Economic Development, Egypt’s 2021 Voluntary National Review, 2030 Vision of Egypt]

Egypt recycles its water, and treated wastewater is often used for irrigation. In 2014, the country produced about 3.5 billion cubic metres a year of municipal wastewater and treatment capacity was about 1.6 billion cubic metres a year. An additional treatment capacity of 1.7 billion cubic metres was targeted by 2017.

Although the planned capacity increase was significant, it is not enough to deal with the projected increase in wastewater production from municipal sources. This means that the amount of untreated water released into water bodies might not reduce. It was also estimated that treatment plants served only 55% of the population in towns and cities.[117M Abdallah, Wastewater Operation and Maintenance in Egypt (Specific Challenges and Current Responses), Sanitary and Environmental Engineering Institute, Housing and Building National Research Center, HBRC, International Journal of Sciences: Basic and Applied Research (IJSBAR), 2014.]

Egypt has about 146 wastewater treatment plants in total, and since FY 2018/2019, 52 wastewater treatment plants with a capacity of 418 million cubic metres per year have been under construction in Upper Egypt. Consequently, the percentage of total treated wastewater in the country had increased to 68.7% in 2019. In 2020, the country announced its plan to build the largest wastewater treatment plant in the world (the Bahr al-Baqar water station) with a capacity of five million cubic metres a day.

According to the Government of Egypt, treated wastewater from the plant will be used for agriculture (342 0000 acres) as part of the Sinai Peninsula Development Program.[118Ministry of Planning and Economic Development, Egypt’s 2021 Voluntary National Review, 2030 Vision of Egypt] Egypt also has 58 desalination plants with a combined capacity of 440 000 cubic metres a day, and 39 more desalination plants are under construction.[119Ministry of Planning and Economic Development, Egypt’s 2021 Voluntary National Review, 2030 Vision of Egypt]

The country has been under water stress, which is likely to be exacerbated by the upstream conditions regarding the Nile and the GERD. Agriculture consumes over 85% of water, followed by municipalities (8%), industry (6%), and navigation and hydropower.

In addition, Egypt faces issues of water quality and its impact on the environment and human health. It also experiences water pollution from a range of sources including chemicals like pesticides and herbicides. Water pollution has led to diseases like bilharzia, especially in rural areas.[120Ministry of Planning and Economic Development, Egypt’s 2021 Voluntary National Review, 2030 Vision of Egypt]

Despite the challenges, Egypt’s water infrastructure has grown significantly, and in 2017 the United Nations Children’s Fund (UNICEF) estimated that 97% of the Egyptian population had access to piped water, meeting the associated SDG target in urban areas.

However, a significant number of people in rural areas and urban slums did not have access to water. In total, about 7.3 million Egyptians did not have access to safe water (5.8 million of them in rural areas and 1.5 million in urban slums). Additionally, in urban slums, only about 77% of the population had access to piped water and most times these were illegal connections.[121UNICEF, Egypt, Water, Sanitation and Hygiene]

According to IFs, Egypt has achieved universal access to safe water, although this will decline slightly over the next decade. This is largely due to Egypt’s large and increasing population, limited water resources and inadequate investment in water infrastructure. It will then resume an upward trajectory to reach 100% access in 2050.

Meeting the population’s water demand and bridging the rural–urban divide will require major investment. Between 2013 and 2017, only about 2.3% of Egypt’s total infrastructure investment was directed to water. In the FY 2020/2021, the Government of Egypt allocated 25.9% of total public investments in the urban development sector to water and wastewater projects.[122Ministry of Planning and Economic Development, Egypt’s 2021 Voluntary National Review, 2030 Vision of Egypt]

Access to water is critical, especially for desert rural communities that also rely on agriculture for their livelihoods.[123Oxford Business Group, Investments in Egypt's large-scale infrastructure build medium-term confidence] IFs projects that water demand will continue to outpace the level of water supply Egypt can provide based on its exploitable water resources.

In summary, the development plans envisioned for Egypt cannot be achieved and are not sustainable without adequate water supply. The government has signed numerous agreements and seeks more funding to build desalination plants in recognition of the important role this would play in the long-term sustainability of water access in Egypt.[124​​M Magdy, Parched Egypt seeks partners for $2.5 billion desalination plan, Bloomberg, 19 August 2021]

However, these must be accompanied by a drive for better water management and more efficient use of this scarce resource, especially in the agriculture sector.[125M Magdy, Parched Egypt seeks partners for $2.5 billion desalination plan, Bloomberg, 19 August 2021] Without closing the water supply and demand gap, Egypt is facing an inevitable crisis.

Sanitation and hygiene

According to UNICEF’S survey of 2014, 8.4 million Egyptians did not have access to sanitation facilities. Compared to 1% in urban centres, 15% of Egyptians living in rural areas did not have access to improved sanitation facilities.[126UNICEF, Egypt, Water, Sanitation and Hygiene] Sanitation is a major concern in rural places like the Nile Delta where the Nile spreads and drains into the Mediterranean Sea.

Traditional bayaras (sanitation trenches used as septic tanks) are failing because the water table is high and soil percolation is low. In fact, to prevent sewage overflows, families are forced to part with nearly 5% of household income to clean their bayaras nearly every week, thus making it even more expensive than conventional sanitation solutions.[127C Nonay et al, In Egypt, a program tied to results helps water and sanitation companies provide service amid COVID-19 pandemic, World Bank Blogs, 25 September 2020]

Data for 2020 by the WHO/UNICEF Joint Monitoring Programme for Water Supply and Sanitation (JMP) shows that at least 97% of the population now have basic access to improved sanitation, although the forecast shows a slight decline in access to improved sanitation in the short term. This is largely a factor of the population pressure in the country, showing that supply of such basic and crucial services will not keep up with demand.

Lack of access to safe water and sanitation leads to poor hygiene and contributes to the spread of diseases, which in turn negatively affects health and nutrition, particularly that of children. In Egypt, for example, diarrhoea is the second most common cause of mortality for children under five.

Investment in this sector is thus critical for sustained human development in Egypt. The National Rural Sanitation Program established by the Ministry of Housing, Utilities and Urban Communities has set a target to expand nationwide access to sanitation services from 34% currently to 60% in 2030. This would be through an integrated system of sewerage networks, sludge treatment and wastewater treatment plants.

One of the initiatives under this programme, the Integrated Rural Sanitation in Upper Egypt-Luxor project, recently received a US$129.8 million (€109 million) loan from the African Development Bank. This was to improve sanitation infrastructure and services to rural communities in Luxor Governorate in Egypt’s Upper Nile region. This venture is expected to improve sewage coverage and services from 6% to 55% in the region.[128T Smith, Egypt: AfDB funds sanitation infrastructure for rural communities, ESI Africa, 8 March 2021]

Energy and electricity access

Owing to increasing electricity demand estimated at an average annual rate of 7%,[129B Bungane, 200MW PV solar power plant to be constructed in Upper Egypt, ESI Africa, 4 March 2021] Egypt has nearly tripled its installed capacity from 15 GW in 2000 to 42 GW by 2017. But even this increase has been insufficient to meet the high and rising demand to end electricity shortages in the country.

Of the 42 GW installed capacity, 91% consists of fossil fuel-based technologies and approximately 8.6% are renewable energy technologies,[130World Nuclear Association, Nuclear Power in Egypt] 77% of which is hydropower. The country has largely developed all its major hydropower sites with little potential to expand further.

Nonetheless, Egypt has a relatively diverse energy mix and has seen significant investment in the sector, particularly after the 2011 revolution that saw increased generation capacity. In 2018, three new power plants came online to contribute an additional 14.4 GW to the country’s power supply. In mid-2018, the government signed a deal to construct the Hamrawein coal-fuelled power plant expected to increase generation capacity by 6 GW.

Most recently, Egypt has started the construction of the El Dabaa Nuclear Power Plant in Matrouh Governorate on the Mediterranean coast.[131World Nuclear Association, Nuclear Power in Egypt] The Russian State Atomic Energy Corporation (ROSATOM) is the developer and Russia is expected to fund approximately 85% of the project with a loan of US$25 billion to be paid over 22 years at 3%. The rest of the 15% financing is to be raised from private investors.

The power plant is expected to generate a total capacity of 4.8 GW. The first unit was expected to be commissioned in 2026.[132Power Technology, El Dabaa Nuclear Power Plant] In July 2021, Egypt announced the postponement of the completion of the project to 2030 instead of 2028 following a row with Russia about the GERD.[133G Mikhail, Egypt postpones nuclear power plant amid tensions with Russia over Nile dam, 28 July 2021] However by August the deal was back on and Russia started equipment production for the plant.[134P Largue, Russia starts equipment production for Egypt’s El-Dabaa nuclear plant, Power Engineering International, 6 August 2021]

The strategy envisions that energy subsidies will be eliminated by 2022 so that other energy sources can fairly compete in the market, an ambitious and perhaps unrealistic target.[135International Renewable Energy Agency, Renewable Energy Outlook Egypt, 2018]

Private sector funding has been the source of buoyancy in this sector and it will probably remain the driving force to greater renewable energy production and uptake in the foreseeable future.

Despite the increasing demand for electricity, Egypt achieved universal access to electricity in 2016, although the supply is not reliable. The IFs forecast is for a modest decline as demand for future connections is likely to outstrip the investment in associated infrastructure. Egypt is looking to be a regional leader in electricity supply over the next nine years, and the country is on track to generate an exportable surplus estimated at 74 GW by 2035. Moreover, the total installed capacity is expected to increase to 83 GW by 2025.[136The Egypt Power Report 2020]

Thermal power is expected to remain the dominant source of electricity at 82% followed by solar,[137B Bungane, 200MW PV solar power plant to be constructed in Upper Egypt, ESI Africa, 4 March 2021] hydro and wind contributing between 4% and 6%. Nuclear power is expected to be introduced in this period, adding 1.2 GW to the total installed capacity by 2025, and ramping up to 4.8 GW by 2030.[138Power Technology, Egypt looking to introduce coal and nuclear while expanding gas, wind and solar capacity, 27 November 2018]

Due to falling costs for renewables, natural gas discoveries and environmental concerns over coal generation, the renewable energy sector will be the fastest growing energy segment between 2019 and 2028. Specifically, Egypt’s non-hydropower renewable energy is projected to be the fastest growing market in the region.[139Enterprise, Why Egypt looks set to be a regional leader in electricity for the next nine years, Enterprise, 11 March 2020] In 2018, the country’s total installed capacity of renewables amounted to approximately 3.7 GW (2.8 GW of hydropower and 0.9 GW of solar and wind power).

According to the Integrated Sustainable Energy Strategy (ISES) to 2035, the government has set the renewable energy target to account for 20% of the electricity mix by 2022 and 42% by 2035. Total installed capacity from renewables is currently expected to reach 8.5 GW by 2028 with an average growth rate of 22.1% year on year (from 2019 to 2028).[140Enterprise, Why Egypt looks set to be a regional leader in electricity for the next nine years, Enterprise, 11 March 2020]

Information and communications technology (ICT)

A dynamic ICT sector is vital for a country that wishes to benefit from the digital economy. Egypt’s government has long realised the benefit of ICT to its continued economic and social development and has over the years deregulated and liberalised the ICT sector while supporting multiple public and private entities.[141United Nations Conference on Trade and Development, ICT Policy Review, Egypt, 2011]

Egypt’s Vision 2030 and 2050 consists of an ICT strategy towards a Digital Egypt under the Ministry of Communications and Information Technology (MCIT), which among other things is meant to streamline government services.

Some of the key priorities for Egypt in this sector include expanding ICT infrastructure, strengthening the regulatory framework and growing a pool of labour skilled in ICT. They also include achieving transition to a knowledge-based economy, ensuring cyber security, supporting research and development, and promoting Egypt’s position at the regional and international levels in this sector.[142United Nations Conference on Trade and Development, ICT Policy Review, Egypt, 2011]

Although Egypt has made great strides in ICT diffusion, it trails significantly compared to most of its peer countries as shown in Chart 25.

In 2020, the MCIT reported that Egypt’s ICT sector grew by 15.2%. The sector’s share of GDP rose to 4.4% (£E108 billion) up from 3.8% (£E93.5 billion) in 2019. The ICT sector exports also increased in 2020 to US$4.1 billion from US$3.6 billion in 2019, representing a 13% rise. Additionally, investments rose by 35% from £E35.4 billion in FY 2018/19 to £E48.1 billion.[143Ministry of Communications and Information Technology, Egypt Telecom Sector Grows by 15.2% Despite COVID-19: Cabinet Report, ahramonline, 2020]

Internet users as a per cent of population also increased to 57.3% from 47.6% in 2019 and the average Internet speed to 33.2 MB per second. Furthermore, 544 400 Egyptians had subscribed to Egypt’s digital platform.[x]

By 2050, IFs projects that the rate of fixed broadband subscriptions will be at just 42 per 100 people, but the country will be more or less on a par with its North African neighbours Algeria and Tunisia.

Owing to increasing demand, Egypt will need to grow its ICT capacity and inject more investments to improve the quantity and quality of services to enable the country to transition to the modern economy it envisions.

Roads

The government has made efforts through the National Roads Project launched in 2014 with the goal of improving transport infrastructure and creating a more modern Egypt.[144MJ Woof, Egypt’s massive transport infrastructure programme, 5 November 2020] Since 2014, 4 800 km of the planned new roads have been constructed leaving 1 400 km that are currently being built. In addition, out of the existing 9 000 km of roads that needed improvement, 5 000 km have already been upgraded.[145A Morsy, Egypt’s roads and railways: Powering ahead, ahramonline, 19 February 2021]

The Nile River and Suez Canal are Egypt’s major transportation arteries, while the Suez Canal and Sumed Pipeline are important routes for Persian Gulf oil shipments. Almost 10% of global trade, and 40% of European trade with the East, passes through the Suez Canal.

Egypt has improved in the World Bank’s Logistics Performance Index (that measures the quality of trade and infrastructure) to score from 2.22 in 2010 to 2.82 in 2018 on a scale of 1–5 (worst to best). Its ranking has moved from 106th (out of 155) to 58th (out of 160). But the country still faces significant bottlenecks in its infrastructure, and as a result Egypt has significantly higher logistical/operation costs averaging about 20% of GDP compared to the global average of about 10%–12%.[146OECD Investment Policy Reviews: Egypt 2020, Chapter 8. Infrastructure connectivity]

Improved road transport is expected to yield a range of economic benefits for Egypt, including in trade with the region. Recognising the potential benefits to expanded road transport, the government is undertaking major upgrades to highways, like the one connecting Cairo with the major Port of Alexandria, and the construction of a new tunnel link under the Suez Canal.

International connections include the highway linking Egypt with its North African neighbours, as well as the highway running north-south via Asyut, Sohag, Luxor and Aswan to the border with Sudan.[147MJ Woof, Egypt’s massive transport infrastructure programme, 5 November 2020]

The Ministry of Transportation is also planning to establish a network of logistical areas and villages in Damietta, Sohag, 10th of Ramadan, Borg El Arab, Sadat and Beni Suef and 6th of October to promote industry and trade, increase investments and reduce logistical costs.[148OECD Investment Policy Reviews: Egypt 2020, Chapter 8. Infrastructure connectivity]

Furthermore, the new road constructions and upgrades are expected to reduce congestion given Egypt’s fast-growing population, and together with new traffic rules, reduce traffic accidents. This will over time improve the human capital contribution to growth.

Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS) reported in June 2020 that the number of road accidents had fallen by nearly 30% from 14 403 in 2014 to 9 992 in 2019, indicating steady progress.[149A Morsy, Egypt’s roads and railways: Powering ahead, ahramonline, 19 February 2021]

The Nile’s predictability and Egypt’s fertile soil have allowed the country to build significant agricultural wealth over the years. The ingenuity of Egyptians to develop basin irrigation and to practise agriculture on a large scale allowed the country to grow staple crops like wheat and barley.[150Food and Agriculture Organization, Ancient Egyptian Agriculture, 2020]

Today, agriculture is still a major contributor to Egypt’s economy at between 11% and 12% of GDP, mostly composed of small-scale farmers. It also accounts for about 28% of jobs, employs 45% of women, and over 55% of employment in Upper Egypt is agriculture-related.[151USAID, Egypt: Agriculture and Food Security]

Wheat remains a major staple, and Egypt is largely dependent on imports (Egypt is the largest wheat importer globally) to run the bread subsidy programme, which is estimated to benefit over 70 million Egyptians.[152Mordor Intelligence, Agriculture in Egypt - Growth, trends, COVID-19 impact, and forecasts (2021–2026)]

The food subsidy system is largely controlled by the government which purchases most of the domestically produced wheat at or above global market prices to promote domestic wheat production. The domestic and imported wheat is then sold at subsidised prices but the system is riddled with inefficiencies related to cost and physical loss.[153J McGill et al, Egypt: Wheat sector review [2015], Country Highlights, FAO Investment Centre, FAO, and European Bank for Reconstruction and Development, 2015.]

Despite these measures, poverty and related food insecurity still exist in Egypt. In fact, budget allocation to the food subsidy scheme more than doubled between 2009 and 2014 owing to a growing population, higher international food prices and wastage along the wheat value chain.[154J McGill et al, Egypt: Wheat sector review [2015], Country Highlights, FAO Investment Centre, FAO, and European Bank for Reconstruction and Development, 2015.]

According to the latest data from 2017, Egypt’s average crop yield is about 26.8 tons per hectare. This is significantly higher than the African average at 2.04 tons per hectare and nearly seven times more than the average of the rest of North African countries (3.99 tons per hectare).

Sustaining Egypt’s agricultural yields will prove challenging in the face of increased population growth, controversy about the Nile, and limited and declining agricultural land. It is estimated that Egypt’s agricultural land in 2018 was 38 360 km², representing only about 3.9% of the country’s total land area.[155Food and Agriculture Organization-AQUASTAT] In fact, the area of cultivated land per person is only about 0.05 hectare, one of the lowest globally. Most of that is located in a narrow strip along the Nile Delta and ‘new lands’ reclaimed from the desert after the construction of the Aswan Dam.[156IFAD, Graduating to a new life farming Egypt’s desert, 9 May 2011]

Although Egypt produces adequate amounts of rice, fruits, vegetables, poultry, chicken and dairy products, it relies on imports to meet demand for crops such as wheat, lentils, red meat, sugar and oils. Despite the fact that Egypt actually increased production and gains in exports of certain strategic crops, the country remains a net food importer, at an estimated 40% of its food needs.[157Food and Agriculture Organization, National Investment Profile, Water for Agriculture and Energy, Egypt; I Tellioglu and P Konandreas, Agricultural Policies, Trade and Sustainable Development in Egypt, Food and Agriculture Organization]

Chart 28 shows that the total agricultural supply has been trailing demand and the gap is projected to widen into the future. Agricultural production is projected to decline slightly and stay stagnant thereafter[158The country has added one million hectares of cropland in the past 50 years or so. The model does not foresee further cropland development, although the country has large reclamation projects in the desert areas.] in the face of increasing food demand, meaning that the gap will have to be offset by imports.

From a food security standpoint, greater import dependence makes Egypt more vulnerable to international price shocks and accompanying risks of disruptions in the global supply chains as seen during COVID-19. Also, reducing the import bill could allow channelling of resources to other productive sectors.

Additionally, production and consumption loss should be reduced. A 2015 study reported that out of the respondents surveyed, only about 14% indicated that they did not throw away food and that food waste increased during the fasting month of Ramadan.[159G Elmenofi et al, An exploratory survey on household food waste in Egypt, Sixth International Scientific Agricultural Symposium, Jahorina, Bosnia and Herzegovina, 15–18 October, Book of Proceedings 2015, 1298–1304, Agriculture Extension and Rural Development Research Institute, Agricultural Research Centre, Giza, Egypt, 2015.]

Now with a growing population, little rainfall, dispute over Ethiopia’s GERD and the impact on its Nile water resources, agricultural fragmentation and shrinking land due to urbanisation, Egypt is at a crossroads to find innovative and effective solutions to its agricultural and food security system.

Furthermore, the country faces serious climate change risks. Flooding due to rising sea levels is affecting the Nile River Delta where Egypt grows most of its crops. About 12% to 15% of the country’s fertile arable land in the Nile Delta will be negatively affected by sea level rise and salt water intrusion.[160World Bank Group, Climate change knowledge portal, Egypt; J Arraf, In Egypt, A Rising Sea — And Growing Worries About Climate Change’s Effects, NPR, 13 August 2017] Moreover, hotter temperatures and reduced rainfall are projected to reduce agricultural productivity (including livestock rearing and fishing activities) by 15%–20% by 2050.[161World Bank Group, Climate change knowledge portal, Egypt; J Arraf, In Egypt, A Rising Sea — And Growing Worries About Climate Change’s Effects, NPR, 13 August 2017]

Egypt’s National Strategy for Adaptation to Climate Change and Disaster Risk Reduction released in 2011 lays out a strategy that gives a framework of its adaptation policy to deal with the effects of climate change. The ‘Green’ constitution predicated on the principle of sustainable environment and development as a human right also recognises and promotes responsible and rational use of the country’s natural resources while ensuring food security for Egyptians.[162N Khalaf, Greening the Egyptian Economy with Agriculture, MEI@75, 12 September 2017]

In addition, the government through the National Water Resources Plan has long sought to improve overall water use efficiency in agriculture. This includes implementing more effective irrigation systems. According to Food and Agriculture Organization (FAO)-AQUASTAT data from 2015, Egypt’s irrigation potential was estimated at about 4 420 000 hectares, and the total land area equipped for irrigation was 3 422 178 hectares in 2002. Of this, 85% was in the Nile Valley and Delta.[163Food and Agriculture Organization, National Investment Profile, Water for Agriculture and Energy, Egypt]

The Government of Egypt is also on a drive to reclaim more land for agriculture with a target of an additional 150 000 acres (60 000 hectares) per year.[164IFAD, Graduating to a new life farming Egypt’s desert, 9 May 2011 ]

Although the government is taking initiatives to boost domestic production and promote sustainable and green farming, much more needs to be done to make the agricultural system more efficient and better geared towards policies that incentivise farmers to focus on food products for which Egypt has a comparative advantage.

For example, Egypt has a comparative advantage in fruits and vegetables, which could potentially attract higher revenues and foreign exchange to then import wheat at global prices rather than at subsidised domestic prices. Such targeted reforms in the food subsidy system could help the country to achieve a productive and sustainable agricultural sector that advances food security.[165I Tellioglu and P Konandreas, Agricultural Policies, Trade and Sustainable Development in Egypt, FAO]

The Current Path analysis has outlined the challenges and opportunities faced by Egypt on its current development trajectory. A central concern is the country’s rapid population growth given its resource constraints. Demographic problems combined with Egypt’s water scarcity and the impact of climate change will continue to be a major challenge in achieving sustainable development. Thus, the management of shared natural resources with other riparian states, and particularly resolving the controversy over the GERD, is crucial for improving Egypt’s water security situation.

Also, economic drawbacks like the high unemployment rate, the health sector crisis that has been accentuated by COVID-19, agricultural import dependence, and challenges relating to good governance and stability need to be carefully managed.

In this section, we complement the Current Path forecast of Egypt’s likely future trajectory by simulating the potential impact(s) of seven sectoral interventions to demonstrate the alternative development pathways that Egypt could adopt towards a more prosperous future. The interventions are predicated on successful reforms and the ability of the Government of Egypt to unlock socio-economic opportunities in manufacturing, agriculture, energy and telecommunications as outlined in its National Structural Reform Programme.

The scenarios consist of interventions in demography; economy and trade; governance and stability; leapfrogging, energy and climate change; health and WaSH; and education — each of which is then compared against the Current Path forecast.

The sectoral interventions need to all happen concurrently and will complement one another. Thus, in the final section, the seven scenario components are combined in an ambitious integrated development agenda that illustrates the impact of a sustained push across all sectors.

In line with the second ten-year implementation plan of the African Union’s Agenda 2063 long-term vision for the future of Africa, the interventions are from 2024 to 2033, simulating a concerted push in that period, after which the level of performance is maintained out to 2050.

All the interventions are benchmarked against ambitious but reasonable targets that have been achieved by countries at similar levels of development or had the same challenges as Egypt (see annex).

Chart 30 gives an overview of the sectoral scenarios.

This scenario increases access to modern family planning (contraception) and the rate of female labour participation. Modern contraception is an immediate way to manage and reduce the rapid population growth in Egypt.

Increasing the rate of female labour participation is a proxy for boosting the availability of more economic and labour opportunities for women. This factor has been identified as a driver for increased total fertility rate of women within the childbearing age. Increasing the labour participation rate for women would also have positive economic effects.

The scenario simulates a 20% increase in access to modern contraception for women of childbearing age (this should be accompanied by greater awareness campaigns and programmes on family planning for both men and women) and an aggressive 50% increase in the rate of female labour participation.

As a result, Egypt’s female participation rate in the economy performs better than the other North African countries and surpasses the average rate of lower middle-income countries globally (41.6%) at 44.5% in 2033 compared to nearly 30% in the Current Path. By 2050, the female labour participation rate will be 50.7% relative to 33.9% in the Current Path.

The outcome is that by 2033, TFR reduces to approximately 2.15 births per woman compared to 2.6 in the Current Path. Egypt therefore reaches the replacement level by 2033 instead of 2043 in the Current Path forecast. By 2050, Egypt’s population will be approximately 142.9 million people compared to 149.9 million, a difference of seven million fewer people in that year.

Improvements in the female labour participation rate will require enforcement of anti-discriminatory policies against hiring women, particularly in the private sector. Investments in childcare and early childhood services would also allow women to pursue productive economic activities. Finally, promoting the growth of industries that can increase demand for female labour is a strategy the government should pursue.[166World Bank, Women Economic Empowerment Study, May 2018]

In the Economy and Trade scenario, the government incentivises manufacturing, energy and agricultural exports. It encourages greater private sector competition through good business regulatory practices, reduces the cost of starting a business, and increases economic freedom.

These interventions reduce the barriers to participating in the economy and encourage entrepreneurship and the creation and survival of businesses. The interventions facilitate a reduction in the size of the informal sector with accompanying improvements in tax revenues and productivity.

The scenario also increases FDI inflows and domestic investment in the economy to stimulate growth and competition in key sectors. Additionally, owing to the importance of remittances to the Egyptian economy, the government incentivises its large diaspora community to increase remittances to the country, and also encourages more injection of productive investment instruments like diaspora bonds to complement household consumption expenses.

According to the 2021 ITUC Global Rights Index, Egypt ranks as the fifth worst country for workers out of 149 countries globally.[167ITUC, 2021 ITUC Global Rights Index: COVID-19 pandemic puts spotlight on workers’ rights, 30 June 2021] To further address the challenge of informality caused by non-compliance of firms to labour standards and worker benefits,[168World Bank, Egypt: World Bank Issues Brief No. 2, Informal is the new normal. Egypt’s Informal Sector is on the Rise, but careful Regulatory Innovation Can Help Turn the Tide] the scenario boosts social insurance and welfare, which in turn boosts households’ tax contributions. This facilitates greater formalisation of all economic actors and provides workers with the associated benefits, including retirement plans.

The result is increased tax revenue, greater formalisation of the economy, and increased protection of workers’ rights and conditions. In addition, this would have the spillover effect of raising funds required for welfare and social safety net programmes for the vulnerable population.

In this cluster, energy, manufacturing and agricultural exports are increased by a magnitude of 30% and 10% respectively over a ten-year period to 2033. FDI inflows and worker remittances also rise by 20% respectively, and social security and welfare tax increases by 15% (a full list of interventions is in the annex).

As a result, revenue from all tax categories (firms, households, indirect and social security welfare tax) will improve. Indirect taxes record the highest increase. Specifically, social security welfare tax increases to US$26.2 billion in 2033 compared to US$20 billion in the Current Path forecast. Also, Egypt’s GDP is US$26.3 billion larger than in the Current Path at US$645 billion in 2033. By 2050, the size of the economy will be nearly US$1.5 trillion compared to US$1.3 trillion in the Current Path, a difference of nearly US$170 billion.

Improved business regulations, increased economic freedom and better labour standards have a very positive impact on reducing the size of the informal economy in this scenario. By 2033, the informal economy will be about 42% of GDP compared to 49% in the Current Path. By 2050, it will be 27% compared to 42% in the Current Path.

The Governance and Stability scenario envisions a more effective government that efficiently provides basic services with increased capacity to adequately collect revenue. This also involves less wastage of resources in the form of reduced corruption and greater transparency and accountability.

Egypt can leverage the potential of the private sector if it can reduce corruption and cronyism, thus improving efficiency, and taking advantage of its capable human capital to achieve its Vision 2030 and 2050 for sustainable development.[169MF Mabrouk et al, Rethinking Egypt’s Economy, MEI@75, 7 October 2020]

The Governance and Stability scenario also improves the level of democracy and promotes greater inclusion, in this case, gender empowerment for women. Furthermore, it simulates a decreased active role of the military in public life and day-to-day governance by reducing the level of military expenditure without jeopardising the country’s security situation.

It also promotes the continued reform of the subsidy system by reducing and eventually phasing out subsidy packages that benefit the wealthy. It redirects some of these resources towards more efficient social policy programmes that better target the vulnerable population for more effective poverty alleviation.

For example, food subsidy reforms in Egypt have the potential to accelerate economic growth and reduce poverty if the government can reduce the number of beneficiaries and better target Tamween recipients. Apart from better targeting, moving to a cash-based subsidy system would be more efficient in reducing poverty. It would stimulate economic growth because it is easier to administer and produces better nutritional health outcomes.[170H El-Enbaby et al, What’s the future of food subsidies in Egypt?, IFPRI, 16 July 2019]

In this scenario, over the ten-year intervention period from 2024 to 2033, government effectiveness is boosted to simulate a 20% improvement. Corruption is reduced by 30%[171Egypt generally scores well in the Government Effectiveness Index and Corruption Perceptions Index (although this is Transparency International’s old scoring system in IFs). However, the large informal sector and slum settlements, poor labour standards, rampant corruption, and other economic challenges belie the relatively good score. As such, the improvements on these two governance indices are benchmarked to simulate aggressive but realistic interventions. The expert workshop on this study confirmed that these interventions are appropriate and reasonable for the kind of improvements that are needed and achievable for Egypt in the forecast horizon.] and government to household welfare to the most vulnerable is increased by 10%, while other subsidies, such as on fuel, are reduced (full list in annex).

The Government Effectiveness Index improves to 2.65 over the Current Path’s 2.15 in 2033, and by 2050, the index will measure 3.2 against 2.5 in the Current Path. The Corruption Perceptions Index score (old score) improves from 3.4 in the Current Path to 4.8 and by 2050 records a score of 6.[172These results put Egypt’s score slightly above the average of upper middle-income economies. However, based on current data on the indices, this is not odd because Egypt seemingly scored better/coming off a higher base than the perception of the reality by experts on the state of Egypt’s governance.] Owing to overall improvement in this governance cluster, GDP per capita is about US$382 and US$2 398 more than in the Current Path in 2033 and 2050, respectively.

In the Leapfrogging, Energy and Climate Change scenario, Egypt uses its considerable ICT and energy potential towards the adoption of modern systems across all spheres of its economy. The country takes advantage of the transformative role of technology and innovation to facilitate healthy competition with the government acting as a regulator to encourage a more conducive business and innovation environment.

COVID-19 has created an opportunity for Egypt to improve its competitiveness and productivity through support of digital transformation by improving associated infrastructure and skills.

The scenario thus makes a push for expansion in the road network to facilitate physical connectivity, particularly in rural areas where even unpaved roads would accelerate movement of people and goods and the penetration of other technological infrastructure. It also improves ICT infrastructure, Internet access and the ability of the government and Egyptians at large to increase integration of technology in business and government services. This would enhance efficiency and effectiveness in the economy.

Egypt’s carbon dioxide (CO₂) emissions are related to the energy industry (fossil fuels) and cement production. In 2018, Egypt emitted about 250 million tons of CO₂ and ranked 27th globally in terms of energy-related CO₂ emissions.[173L Abdallah and T El-Shennawy, Evaluation of CO2 Emission from Egypt’s Future Power Plants, Euro-Mediterranean Journal for Environmental Integration 5, 2020, 49]

The Leapfrogging, Energy and Climate Change scenario introduces a carbon tax and increases the role of renewables in Egypt’s transition to a greener economy and cleaner energy.[174UN-PAGE, May – Egypt launches a national strategy for green economy at AMCEN; UN Environment Programme, Egypt] The scenario simulates a future where smart innovations eventually reduce the rate of capital investment required for renewables and nuclear energy and increase the cost of investing in fossil fuels to facilitate greater uptake of renewables.

In this scenario, mobile and fixed Internet access expands by 20% over the ten years of intervention, the capital investment on renewables and nuclear energy decreases by 20% and that of coal increases to simulate divestment in that sector. A carbon tax cost of US$50 is also instituted in line with Egypt’s commitments to reduce carbon emissions.

By 2033, the number of people with fixed broadband will be approximately 32.8 million compared to 28 million in the Current Path forecast. And by 2050, 11.6 million more people will have fixed broadband connections relative to the Current Path’s 63 million. Carbon emissions will increase to 116 million tons (Mt) compared to 118 Mt in the Current Path in 2033. And by 2050, it will be 154 Mt compared to 162 Mt in the Current Path forecast.

In the Health and WaSH scenario, Egypt reduces deaths of children under five (mostly due to communicable diseases) as well as mortality due to NCDs (cancer, cardiovascular-related illnesses, diabetes and respiratory infections). It promotes better awareness, diagnosis and management of NCDs to reduce deaths related to them.

The scenario also reduces the prevalence of smoking, which is quite high and is associated with most cases of cardiovascular-related complications and other major NCDs in the country. It also reduces the rate of traffic-related deaths.

Egypt also increases the portion of treated wastewater to promote reuse and better water management in a country projected to face a continued crisis. This water crisis is due to climate change and controversy over the use of the Nile water with other riparian states. Wastewater that is treated and reused is also increased by 50% over the intervention period.

In this scenario, NCD deaths are reduced by 30% (full list in annex). Wastewater that is treated and reused is also increased by 50% over the intervention period (full list in annex).

The rate of NCD deaths per 1 000 people reduces to about 4 511 deaths compared to 5 196 in the Current Path in 2033 and by 2050, 5 748 against the Current Path’s 6 210. Treated wastewater rises to over 9.5 km³ compared to 6.4 km³ in the Current Path by 2033 and by 2050, 12.7 km³ against 8.9 km³ in the Current Path forecast. Wastewater that is treated and reused increases from 2.2 km³ in the Current Path relative to this scenario at 5.1 km³ by 2050.

The Education scenario improves educational outcomes especially at secondary and tertiary levels where bottlenecks have started to emerge. A good stock of education through a well-trained population would allow Egypt to increase its human capital and promote advancement of the economy by adequately taking advantage of technology and innovation.

In addition, the scenario increases enrolment in science and engineering, and expands the scope and intake for technical skills through more vocational training. The scenario simulates a 20% increase in major educational attainment indicators. Vocational training is expanded to five times the current level.

Beyond quantity, the education scenario improves the quality of education at primary and secondary levels by 20% and 10% respectively. Gender parity is also achieved by 2033 at all levels of the education system in the scenario.

In 2033, relative to the Current Path, the quality of secondary education improves by over four points compared to 45 in the Current Path and by 2050 Egypt records 53 points in the quality index relative to 48 in the Current Path. The rate of tertiary graduation increases to 33% compared to 28% in the Current Path in 2050.

The Agriculture scenario increases agricultural yields and the land area actually irrigated to facilitate stable and reliable agricultural production while restricting increases in water use to emulate greater efficiency and better management of water in the sector.

Agriculture already consumes about 85% of the country’s freshwater resources. It simulates an increase in land under cultivation according to Egypt’s efforts to reclaim some of the desert land for crop farming.[175Based on Egypt’s land profile in IFs (land types categorised as crop, grazing, forest, urban and other), and considering the portion of arable land, this intervention does not increase land under cultivation because the model does not see scope for increasing land under cultivation in Egypt. However, this might be possible under the desert reclamation efforts by the Government of Egypt.] It also reduces agricultural and food loss.

In this scenario, agricultural yields are boosted by 15% and loss of agricultural produce in the transmission process and at consumer level is reduced by 20% and 30% respectively (full list in annex). Additionally, this scenario increases per capita demand to ensure there is enough food in the country to meet domestic demand (a proxy to ensure that not all agricultural produce is exported).

By 2033, yields will improve from 29.4 tons/hectare in the Current Path to 32.9. The forecast shows a slight gradual decline of yields after 2033, and by 2050, Egypt records 32.1 tons/hectare compared to 28.5 in the Current Path forecast. Additionally, by 2050, agricultural import dependence on crops declines to about 44.5% compared to nearly 46% in the Current Path forecast.

The impact of the Agriculture scenario is an increase in crop production by 12.6 million tons in 2033 and 12.8 million tons by 2050 compared to the Current Path forecast. As a result, Egypt’s import dependence as a per cent of net demand drops by 1.2% in 2050.

When compared with one another, the Demographic scenario makes the greatest contribution to GDP by 2033. In the Demographic scenario, by 2033, the Egyptian economy would increase by about US$51.3 billion more than the Current Path forecast to approximately US$697 billion.

The results illustrate the impact of a significantly higher female labour participation rate and shows how Egypt’s rapid population rise constrains growth and development in the country. A reduction in the absolute number of people would therefore promote sustainable growth and development in Egypt.

After the Demographic scenario, the Economy and Trade and the Governance and Stability scenarios make the greatest improvements in GDP in 2033, respectively. From 2037, the Governance and Stability scenario outpaces the Economy and Trade scenario in its impact on the size of the economy.

These results highlight Egypt’s key challenges and show the importance of good, accountable and inclusive governance to stability and sustainable development once economic reform has been achieved.

The Health and WaSH and Agriculture scenarios will also contribute a significant portion to GDP by 2033. This not only illustrates the importance of increased water supply and its efficient management, but also the ability of agriculture to contribute to growth, especially for Egypt’s large rural population.

From 2040, the Governance and Stability scenario makes the greatest contribution to the size of GDP until the end of the forecast horizon. By 2050 the Governance and Stability scenario is followed by the Economy and Trade, Health and WaSH, Demographic, Education, Leapfrogging, Energy and Climate Change, and Agriculture scenarios. The performance of the Agriculture scenario over the forecast horizon reflects the declining role of agriculture as Egypt’s economy goes through a structural transformation and the impact of constraints on water supply.

The Demographic scenario records the largest improvement in GDP per capita to 2045. Given that Egypt’s population is already beyond the boundaries of sustainable development, fewer people means that the ratio of dependence will drop, and in absolute terms there will be a larger share of the Egyptian national cake to distribute.

Moreover, Egypt already has a sizable portion of human capital that is underutilised. Therefore investing in relevant and useful skills, promoting female participation in the labour market and reducing the barriers to formalising its large informal sector are important factors in boosting the productivity and dynamism of its economy.

After the Demographic scenario, increases in GDP per capita are followed by the Economy and Trade and the Governance and Stability scenarios, and by 2050, the Governance and Stability scenario achieves the best outcome in improving GDP per capita. The improvements in the Governance and Stability scenario demonstrate the significant contribution that good governance could make to the welfare of Egyptians, especially with better targeted social safety nets for the vulnerable population.

Improvements in GDP per capita in 2050 from the Governance and Stability scenario are followed by the Demographic, Economy and Trade, Education, Health and WaSH, Leapfrogging, Energy and Climate Change, and Agriculture scenarios.

The Demographic scenario also has the greatest impact on reducing extreme poverty by 2033. In absolute terms, Egypt would have fewer people therefore reducing the incidence of poverty. Moreover, increased female participation in the economy would ensure that more people are economically productive and earning an income.

Using the US$3.20 threshold for low middle-income countries, by 2033 about 15.8% of the population (19.5 million people) is projected to be living in extreme poverty compared to 18.4% (approximately 23 million people) in the Current Path in the same year.

The Governance and Stability scenario has the second greatest impact on extreme poverty alleviation at 16.4% in 2033. It is followed by the Agriculture scenario, reflecting the short- to medium-term importance of agriculture in extreme poverty alleviation, especially for Egypt’s rural poor. Thereafter, reduction in extreme poverty will be followed by the Education, Leapfrogging, Energy and Climate Change, Health and WaSH, and Agriculture scenarios.

However, the Economy and Trade scenario and Health and WaSH scenarios would, by 2033, modestly increase extreme poverty owing to the massive resources required to invest in the economy to promote industries in manufacturing and exports and other basic infrastructure. Eventually, by 2050, all the scenarios yield positive reductions in extreme poverty compared to the Current Path forecast. But the Governance and Stability scenario will have the greatest impact with only 8.2 million Egyptians surviving on income below US$3.20 compared to 12.8 million on the Current Path forecast.

Overall, this reiterates the need for good and efficient governance, even in the management of Egypt’s resources as the country invests in other sectors in light of its rapidly growing population and limited resources.

The Demographic scenario has the most significant achievement in propelling Egypt towards an increased demographic dividend — i.e. the economic benefits derived from change in a country’s population age structure. In this case, fewer births would reduce the level of dependence in relation to the working-age population. Deceleration in population growth would avail more resources and encourage households to save more and invest in themselves and the economy.

On informality, the Economy and Trade scenario makes the greatest impact on reducing the size of the informal economy as a share of GDP. By 2050, the Economy and Trade scenario reduces the share of the informal economy to about 27.4% relative to 42.4% in the Current Path forecast. Improvements are then followed by the Demographic, Education, Governance and Stability, Health and WaSH, Agriculture, and Leapfrogging, Energy and Climate Change scenarios.

Finally, the Health and WaSH scenario has the greatest impact on increasing Egypt’s water supply by 2033. It is followed by the Demographic scenario, which illustrates the pressure that Egypt’s large and rising population puts on the country’s ability to adequately and sustainably meet the water demands of its people. However, by 2038, the Governance and Stability scenario outpaces the Economy and Stability scenario in this regard.

Egypt has dedicated significant resources to undertake projects like desalination, but the country faces financial limitations in realising consistent and sustainable water supply for an extended period of time owing to the costly nature of desalination. These efforts must therefore be supplemented with aspects of good and efficient governance and service delivery that ultimately impact conservation and better use of resources like water.