Former Egyptian Finance Minister Youssef Boutros-Ghali, who has just been sentenced in absentia to 30 years in jail on corruption charges, was twice awarded the Emerging Markets Minister of the Year for the Middle East for championing economic reforms. His claim that Egyptian economic policymakers had “developed a sixth sense of where the economy is and where it should be” reflected Egypt’s impressive pre-revolution macro-economic performance, measured in terms of GDP growth, trade, private investment and foreign direct investments. Foreign exchange reserves also swelled under his watch. In 2008, Egypt was named the top reformer in the World Bank’s Doing Business survey.

At the same time, an audit report of the United States Agency for International Development’s (USAID) democracy and governance activities found that, “independent nongovernmental organizations ranked Egypt unfavorably in indexes of media freedom, corruption, civil liberties, political rights and democracy. Egypt’s ranking remained unchanged or declined for the past two years.” Significant discontent over public service delivery, such as in education and transportation, was registered. Egypt had very high rates of unemployment with only half the labor force having jobs, two-thirds of which were in the informal sector; the government was the majority formal sector employer. Egypt’s government habitually spent 8 percent or more of GDP in social subsidies, but because of poor targeting these largely went to better off households.

These two Egyptian economic realities—the dynamic, emerging economy driven by the elite and the state-dependent, repressed informal economy in which most Egyptians actually live—are in desperate need of help today. A recent International Monetary Fund (IMF) program is targeted at the first problem: how to avoid a short-term collapse of the formal economy. But that is unlikely to be sufficient and may even be harmful in the medium term if problems in the informal economy are not addressed. This policy paper addresses the second problem by exploring how to engage Egypt’s civil society in creating an equitable new economy, where jobs and self-reliance reduce state-dependence and restore dignity to the Egyptian people.