Last November, Egypt’s Central Bank announced it was taking steps to allow the pound to trade freely on the currency market. The move to float was widely regarded as a necessary, but incredibly difficult one. The Central Bank had held the pound at around eight to the dollar; today it stands closer to 18 pounds to the dollar. As expected, the decision led to a 12 billion dollar loan from the International Monetary Fund (IMF) and a reform plan designed to attract foreign investment, boost growth, and shore up the country’s reserves.
But floating the currency raised immediate concerns about its effects on the lives of Egyptians and on the country’s stability: the economy’s deterioration had already been tied closely to the security situation, and the specter of the 1977 bread riots loomed large. Particularly, the country’s tourism industry had been reduced to a shadow of its former self, in part due to high-profile attacks targeting foreign nationals, dealing a blow to foreign currency reserves.
But, largely due to the tight fist the current government has clenched around any public dissent, no significant action has directly threatened Egypt’s stability in the past year, and for the most part Egyptians have suffered through with little recourse to address the impact of policy decisions. However, the fact that no large-scale destabilizing activity has yet occurred does not meant the economic crisis has had no impact.
Economic privation as a causal factor in extremism or terrorism does not hold much weight: many who join extremist groups are from wealthy or middle classes, and many who live in poverty do not resort to violence. Yet, while they may not explain terrorism outright, economic factors do play a role in recruitment efforts, resources to sustain operations, and targeting decisions. Thus, the long-term effects of the economic crisis on Egypt’s security require a more nuanced consideration.
Indeed, Egyptian terror groups have explicitly targeted economic interests. A string of attacks on electrical and transportation infrastructure, as well as on multinational corporations were carried out in 2015 and 2016. The Revolutionary Punishment, a group operating out of Giza, stated that such attacks were meant to send a message that any entity supporting the regime might be targeted, and this included foreign entities doing any kind of business in the country, even if not directly with the government. In early 2016, another group, the Popular Resistance Movement, carried out similar attacks under a campaign they called the “Economic Blockade.”
October 2015 saw Egypt’s deadliest-ever attack on tourists, when militants from the Islamic State’s Sinai province brought down Russian Metrojet Flight 9268, killing all 224 passengers aboard. After the MetroJet bombing, Russia stopped flights to Egypt, and other airlines followed suit.
While these attacks dealt blows to the economy, the reverberating effect that economic downturn has had on resource accumulation and on recruitment is more difficult to discern. Militant recruitment has been particularly strong in North Sinai where the population (particularly the Bedouin population) is marginalized from the rest of the country. Traditionally relying on agriculture as a main economic driver, the region’s economy has been severely disrupted by years of conflict that have seen successive (aerial and ground) military campaigns, forced displacement, and a lack of investment of state resources, especially in areas east of the capital city of Arish. Up until 2013, an expanding network of smuggling tunnels to Gaza brought cash into the province, and the black market became not only a source of income for many of the youth, but also a source of weapons trade that benefit militant groups.
After 2013, many of the tunnels were destroyed in military campaigns to halt smuggling. The city of Rafah on the Gazan border was essentially cleared out to create a security “buffer zone,” its residents relocated with some compensation. For their part, militants have tried to capitalize on local frustration, at times handing out aid packages, and in one statement addressed to local residents, calling themselves “your brothers…men from [Egypt]…perhaps your neighbors or relatives.”
Already marginalized and under the constant threat of conflict, North Sinai is now faced with hyperinflation and scarcity of goods as is the rest of the country. How has it impacted black market trade, and who might benefit from this? How do residents view the crisis, and what are their perceptions of the government’s handling of it?
Unfortunately, clarity on anything Sinai-related is elusive. The Egyptian government has effectively cut off communication, imposing long curfews and blocking chat and VOIP applications as far west as Bir al-Abd. Any entry to Arish or east requires proof of residency there. News reporting is under de facto prohibition, journalists face harassment or imprisonment, and international business and non-governmental organizations are discouraged from operation by harsh legal restrictions.
The nuanced understanding of the security-economy nexus in North Sinai and in the rest of Egypt is critical as the government continues on a path of economic reform. This understanding requires a greater transparency and access to information about the areas most severely compromised by economic crisis, those marginalized like North Sinai. Without this, the plan’s goals—investment and growth—will face continued risk of being undermined by the threat of violence and instability.
