{"id":18365,"date":"2024-10-23T14:29:03","date_gmt":"2024-10-23T12:29:03","guid":{"rendered":"https:\/\/zawia3.com\/?p=18365"},"modified":"2026-10-08T23:18:48","modified_gmt":"2026-10-08T21:18:48","slug":"war-economy","status":"publish","type":"post","link":"https:\/\/zawia3.com\/en\/war-economy\/","title":{"rendered":"Is Egypt Reshaping Its Economic Future Through the Concept of a War Economy?"},"content":{"rendered":"

Amid worsening regional crises and their impact on the region’s future, and rising political tensions, Prime Minister Mostafa Madbouly spoke of a new phase that may impose an unfamiliar equation on Egypt. With conflicts escalating in the Middle East, the features of what is known as a “war economy” are emerging, meaning that the state directs its resources towards preserving its stability and survival, instead of pursuing growth and prosperity.<\/p>\n

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A few days ago, Prime Minister Mostafa Madbouly<\/a> announced that the rapid developments in the region may push Egypt to adopt a war economy policy if a regional conflict breaks out. He also indicated that the current international and regional tensions are unprecedented, and that the outbreak of a regional war would have major repercussions at all levels, stressing the need to focus on the continued provision of goods, services and infrastructure to the Egyptian people, and calling for strengthening governance measures and rationalising spending and consumption to confront any possible scenario.<\/p>\n<\/blockquote>\n

The term war economy<\/a> has its roots in the American Civil War between 1861 and 1865, and it re-emerged prominently during the Second World War, when US President Franklin Roosevelt pointed to the need for his country’s economy to shift towards serving the military effort in the event of an Axis victory. Since then, the concept has become a major tool for countries engaged in major conflicts, and the United States is among the countries that adopted it most, during the First and Second World Wars as well as in the Vietnam War.<\/p>\n

The term reflects a radical shift in the orientation of the national economy, as a large part, or all, of the country’s resources is redirected to meet the needs of the army. This shift includes providing all the supplies necessary to wage battles and protect national security, so that the priority becomes securing the goods and services necessary for the war effort.<\/p>\n

This economy relies on enacting laws that enable the state to take comprehensive control of national resources<\/a>, while imposing fundamental changes in industrial production policies to align them with military objectives. It also includes imposing new tax measures and financial adjustments to ensure a balance between the state’s general requirements and emergency military needs.<\/p>\n

In short, a war economy is an exceptional shift in the course of states, combining economic and military power and directing the nation’s energies towards confronting the existential challenges imposed by major conflicts.<\/p>\n

Recommended reading:<\/strong> Between the October War and Gaza… Are We Still Victorious?<\/a><\/p>\n

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Egypt and the War Economy<\/h3>\n
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The defeat Cairo suffered in 1967 caused severe economic losses, as those losses<\/a> were estimated at about EGP 11 billion, “equivalent to about USD 25 billion at the exchange rates prevailing at the time”, according to estimates by former Prime Minister Aziz Sedki. Egypt lost about 80% of its military equipment, which forced it to secure large financial resources to buy replacements. Suez Canal revenues were also greatly affected, with losses of about EGP 95.3 million, in addition to the loss of the oil wells in Sinai. The damage caused by the Israeli occupation’s bombardment of Suez Canal facilities amounted to nearly EGP 1 billion, while tourism lost about EGP 37 billion annually. Industry was also damaged, as 17 major industrial facilities were destroyed, at a cost of EGP 169.3 million.<\/p>\n<\/blockquote>\n

In light of these conditions, Egypt resorted to a “war economy<\/a>” policy between 1967 and 1973. In February 1973, the war budget prepared by Prime Minister Aziz Sedki was announced; it aimed to provide the funding needed to meet the needs of the armed forces, including medical supplies and foodstuffs, while long-term development projects were postponed. Government measures included cutting government spending, including reducing travel and transport allowances and spending on holidays and seasonal occasions. In March of the same year, additional steps were taken to cut allocations for water, lighting and transport, with appropriations reduced by 10% in some areas and by 75% in allocations for holidays and occasions.<\/p>\n

The data<\/a> show that military spending jumped markedly from USD 481.8 million in 1966 to USD 1.243 billion in 1973, reflecting the focus on defence investment, and military spending as a share of GDP rose from 6.68% to 13.51%. During that period, the state followed a contractionary policy based on three main tools: raising the prices of luxury goods, imposing indirect taxes and reducing domestic investment.<\/p>\n

As a result, revenues from indirect taxes rose from EGP 442.5 million in 1970 to EGP 574.7 million in 1973, while direct taxes recorded about EGP 257.5 million. The main source of aid to Egypt in this period was the Arab countries, which provided grants at a rate of USD 286 million a year to compensate for the shortage of foreign aid.<\/p>\n

Today, although about 51 years have passed since the last wars Egypt fought, citizens find themselves as if they are still living under a war economy; the economic suffering weighing on the various classes has not stopped, but has increased over time. Rising prices, increasing taxes and the scarcity of some basic goods are part of Egyptians’ daily lives, recalling the difficult atmosphere the people lived through in the 1970s.<\/p>\n

Recommended reading:<\/strong> Are Economic Conditions Responsible for Rising Crime Rates in Egypt?<\/a><\/p>\n

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Justified Economic Conditions?<\/h3>\n

Air Major General Hussein El-Qaffas<\/strong> recounts what he lived through at the time of the October War, and how citizens faced severe economic conditions under its weight, but despite the hardships the situation was justified, as the state was indeed in a real state of war. He says: “I remember when we used to go to the consumer cooperatives to buy chicken every week, and things were restricted for us because of supporting the war effort. At that time, my salary ranged between EGP 70 and 90, and all the school expenses of one of my children, from books to clothes, did not exceed EGP 78. Life, despite its hardship, was something one could adapt to.”<\/p>\n

He adds, speaking to Zawia3: “In comparison with the past, Tel Aviv, in the period before the October victory, had great weapons and capabilities, while Egyptian citizens accepted the difficult economic situation, bearing the consequences of the defeat in the 1967 Naksa. I lived through that period as a student at the Military Academy from 1966, and the media at the time were far from the truth and did not present the full picture. We had military forces in Yemen and considerable resources, yet the Egyptian people, despite the defeat, were able to remain cohesive; no one went to sleep without dinner.”<\/p>\n

He continues: “Today, with the economic crises hitting the country and the world, including Europe, we find ourselves forced to bear reality and resort to praying for those suffering from the pressures of daily life. Despite everything the country faces, the question remains: what can the authorities do amid worsening global challenges? We must all stand together and help the current political leadership so that we get through this phase. What we see around us in Yemen, Libya, Sudan, Lebanon, Syria and other countries requires of us nothing but standing as one in order to get through.”<\/p>\n

Through the eyes of the current reality, Sayeda<\/strong> (42, an Arabic language teacher at a public school in Giza) complains about high prices, and believes that the situation of teachers and most Egyptians has become pitiful; salaries do not last the whole month, and although she supports her husband, living conditions are extremely difficult.<\/p>\n

Holding back her tears as she speaks to us, Sayeda recalls a crisis she faced recently when she heard about the rise in the price of a butane gas cylinder, which has now reached EGP 200, in addition to talk of converting subsidies from in-kind to cash. Whatever the subsidy, it will not help, as high prices and the decisions the government takes are a burden on ordinary citizens who only dream of reaching the end of the month without falling into the spiral of borrowing from others.<\/p>\n

Mohamed<\/strong> (37, a freelance lawyer and resident of the Mohandessin area) says the current living conditions remind him of what his father used to tell him about the 1970s. Despite the hardship Mohamed remembers from his father’s stories, he believes he is living through rampant price rises beyond description, and that buying supplies at a single price has become impossible, referring to traders pricing goods at more than one price.<\/p>\n

He touches on the inflation the country has been suffering from for a long time, which drives up prices. He says: “We go to sleep on one price and wake up to another. If this money were being directed to arm the country in the event of war, we would all support that, but we are supposedly not living in a time of war, so can we save those difficult conditions for their time? Prices need a pause, and living conditions also need a pause, so that salaries match prices.”<\/p>\n

Recommended reading:<\/strong> The Egyptian Pound Pays the Price: Hot Money Hits Egypt’s Economy<\/a><\/p>\n

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Economic Fears and IMF Instructions<\/h3>\n

Abdel Nabi Abdel Muttalib<\/strong>, former Undersecretary of the Ministry of Industry and Trade for Economic Research, believes that the prime minister’s talk of Egypt possibly resorting to a war economy may not have been an accurate expression; in his view, the prime minister’s words failed him when he used this term, which has become a thing of the past.<\/p>\n

What Madbouly was referring to, according to Abdel Nabi, are fears of possible economic repercussions from the widening of the war in the Middle East, not an actual declaration of a war economy as it was understood in previous decades.<\/p>\n

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The former undersecretary explains, speaking to Zawia3, that the term used to mean the authorities’ complete control over all economic activities: the government issued coupons to distribute foodstuffs and set a precise plan for distributing resources. It also supervised all factories, banks and investments in the country, and no money moved from inside to outside or vice versa without official permission from the authorities, while imports and exports were entirely subject to direct government supervision and official approval.<\/p>\n<\/blockquote>\n

He believes this statement may be linked to the continued postponement of the reviews with the International Monetary Fund, which were supposed to take place last September but were postponed to next November and may be postponed again to January of the new year. He points out that Egypt may need to take strict economic measures to complete these reviews, but they could carry serious political and social consequences, especially amid the unprecedented rise in prices, which has often left Egyptian citizens unable to meet their basic needs.<\/p>\n

Abdel Nabi believes the statements were mainly directed at the domestic Egyptian audience, but did not take into account that the whole world was following them. Therefore, those statements could have a greater negative impact on the economy than the war itself, especially at a time when Egypt is striving to attract foreign investment and improve the image of its economy before the world.<\/p>\n

MP Abdel Moneim Imam<\/strong>, secretary of the House of Representatives’ Plan and Budget Committee, agrees with the political economy professor that the statements about declaring a war economy during the recently held conference were ill-judged, noting that this type of statement did not suit the atmosphere of the conference, at which the ministers of investment and finance were supposed to discuss investment incentives and plans. He added that talking in such a context reflects poor judgement on the part of the official.<\/p>\n

He points out that if a war occurs or there are effects from regional wars, it is natural for the state to move towards a war economy, which may negatively affect oil and commodity prices, stressing that these statements do not reflect a tangible reality, as the situation calls for a considered response.<\/p>\n

Speaking to us, the secretary of the House Plan and Budget Committee considers that such statements lack wise policy, and says he had hoped the situation would be better than this. He stressed that talk of a war economy adds nothing new from the prime minister, and expressed concern about things turning into an austerity economy amid the crises, stressing that the application of war economy policies differs from one country to another depending on the scale of the effects the country may experience.<\/p>\n

Recommended reading:<\/strong> Saudi, Emirati and Local Withdrawals Stall Huge Projects in Egypt<\/a><\/p>\n

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Solutions Outside the War Economy Box<\/h3>\n

Alia El-Mahdi<\/strong>, former dean of the Faculty of Economics and Political Science at Cairo University, believes it is difficult to apply the concept of a war economy, stressing that matters can be viewed from another perspective, namely the internal challenges facing Egypt, which are not only due to the dollar shortage or exchange rate fluctuations. Instead, she focuses on the need to boost employment, savings, investment and production, and to open the doors to the private sector, which employs about 75% of the country’s workforce.<\/p>\n

Alia stressed that the role of the private sector has declined markedly, as its share of bank credit does not exceed 21%, a very low rate, reflecting an environment that does not encourage investment and production.<\/p>\n

She adds, speaking to Zawia3, that the private sector is the main source of production, employment and exports for all goods except oil, which is monopolised by government institutions, and that this has led to lower growth rates. Regarding the National Dialogue, Alia expressed her surprise at the failure to implement the decisions and proposals reached six months ago.<\/p>\n

She stressed the importance of involving a limited number of experts with the economic group in this dialogue, and implementing all their recommendations immediately to ensure that the desired goals are achieved, adding that we must focus on these matters before thinking about announcing other, harsher measures that war economies may impose.<\/p>\n

In this context, Karim El-Omda<\/strong>, head of the economic unit at the Tahrir Center for Studies, says the statements made by the prime minister about the possibility of declaring a war economy if the regional situation continues are completely ill-judged. He adds that we must realise that Egypt is not in an actual state of war, as the concept of a war economy requires social and economic balance, in addition to mobilising resources to support the war effort.<\/p>\n

He points out that this type of economy relies on continuous austerity and a constant reassessment of exports and imports, and explains that in a war economy all sectors of society, including doctors and engineers, must contribute to the war effort, which may create a kind of military control over political affairs.<\/p>\n

The head of the economic unit at the Tahrir Center stresses that a war economy goes through three main stages: the preparation stage, the stage of confronting the enemy, and the post-war reconstruction stage. Nevertheless, he stresses the need to describe the current situation more accurately. He says: “It would be better to indicate that we are in an exceptional situation or an emergency economy because of regional frictions.”<\/p>\n

He concludes by saying that the country needs to have a sufficient stock of goods, and that efforts must be made to rationalise imports and increase foreign currency resources, while recognising that a “war economy” differs from one country to another depending on the level of involvement in conflicts and its impact on citizens’ basic goods.<\/p>\n

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After the prime minister’s statements, there were wide reactions rejecting them. Media figure Osama Gaweesh highlighted the prime minister’s statements on the possibility of Egypt resorting to this type of economy, stressing that it is characterised by states taking strict measures during emergencies, such as diverting state budgets to armament and rationing basic goods, in addition to imposing new taxes and exceptional prices.<\/p>\n<\/blockquote>\n

Gaweesh noted in a post on the “X<\/a>” platform that Cairo applied a war economy from 1967 to 1973 after the 1967 Naksa, as consumption was cut and savings and local production were encouraged, in addition to a donation campaign for the war effort. He also mentioned the issuance of jihad bonds during the October War to support the armed forces, which raised EGP 7 million in one month.<\/p>\n

Speaking about the current situation, he explained that since 2016 Egypt has seen austerity measures similar to a war economy, as the share of military spending increased and heavy taxes were imposed on citizens, while the government continues to rationalise subsidies and raise fuel and service prices. On the other hand, he pointed out that the government spends lavishly on projects that achieve no tangible benefits and closes struggling factories. He asked at the end of his post: Does activating a war economy today require citizens to bear more burdens, or will the army and the hidden funds be asked to contribute to meeting the state’s needs?<\/p>\n

Commenting, Abdel Nabi Abdel Muttalib explains that this term means the authorities’ complete control over every economic artery beating in the country, so that the economy becomes governed by the priorities of the battle. He adds that restricting imports in this case becomes a suffocating constraint, as goods are only allowed in in rare and necessary cases, leading to economic stagnation and a halt to the wheel of production; the economy cannot bear this strangulation, and banning exports eliminates opportunities for the flow of raw materials and production inputs to factories, resulting in a frenzied rise in prices.<\/p>\n

He stresses that a war economy is merciless: even the simplest daily needs of citizens are distributed through coupons, so that bread, oil and petrol are confined between the fingers of the authorities, and the strategic stock is drawn down according to strict criteria, with no room for frivolity or leniency. The stock turns into what is known as “war stock”, the authorities’ weapon in facing crises, which is only depleted in cases of extreme necessity.<\/p>\n

Speaking in a warning tone, he points out that Egyptian citizens will be the silent warriors in this battle, as they will bear all the heavy burdens alone, amid ambiguity regarding support from the sovereign funds or the funds belonging to the armed forces. He stresses: “We do not know how many billions the state’s funds or the sovereign fund contain, and I believe there will be no intervention to relieve the pressure on citizens. All these burdens will fall on citizens’ shoulders, and no one will escape them.”<\/p>\n

In this context, despite the absence of direct war in the country, many Egyptians feel as if the authorities are still waging an undeclared economic battle; accelerating inflation and the deterioration of purchasing power, along with the imposition of new financial burdens such as various taxes and fees, make the current scene closer to a war economy, as citizens find themselves forced to adapt to a difficult reality that demands more sacrifices of them, as if the battle has not yet ended. In that period, the goal was military victory, but today the struggle is about economic survival and continuity amid increasingly complex internal and external pressures.<\/p>\n","protected":false},"excerpt":{"rendered":"

Prime Minister Mostafa Madbouly’s remarks on a possible return to a “war economy” raise questions about Egypt’s economic future and its impact on citizens.<\/p>\n","protected":false},"author":11,"featured_media":10867,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[409],"tags":[19337,10280,10781,19339,19335,5352,738,19336,19338,19334],"kateb":[4582],"class_list":["post-18365","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics-en","tag-austerity-egypt","tag-cost-of-living-egypt","tag-egypt-economic-crisis","tag-egypt-private-sector","tag-imf-review-egypt","tag-inflation-egypt","tag-mostafa-madbouly","tag-october-war-economy","tag-regional-conflict-economic-impact","tag-war-economy-egypt","kateb-imam-ramadan"],"jetpack_featured_media_url":"https:\/\/zawia3.com\/wp-content\/uploads\/2024\/10\/\u0627\u0642\u062a\u0635\u0627\u062f-\u0645\u062f\u0628\u0648\u0644\u064a.png","_links":{"self":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts\/18365","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/comments?post=18365"}],"version-history":[{"count":1,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts\/18365\/revisions"}],"predecessor-version":[{"id":18366,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts\/18365\/revisions\/18366"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/media\/10867"}],"wp:attachment":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/media?parent=18365"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/categories?post=18365"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/tags?post=18365"},{"taxonomy":"kateb","embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/kateb?post=18365"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}