The trade war between the US and China that began in 2018 has expanded to include technology bans, investment restrictions, and high tariffs. While such developments will not bring down the global economic system, they do mark a turning point.
The old world order built on free trade, international cooperation, and shared financial rules is slowly giving way to a more fragmented and unpredictable system. Today, many countries are more focused on protecting their own economies than on global coordination.
The change goes far beyond US-China competition. Around the world, governments are starting to use financial tools and technologies as weapons in political disputes. They are building their own trade routes and payment systems and becoming less willing to trust one another. As a result, the global economy is splitting into different camps, especially when it comes to vital industries like semiconductors, green energy, digital networks, and defence.
Even allies are finding it harder to stay aligned, as they face pressures to choose sides or protect their interests first.
We are navigating a period of economic uncertainty, one that has already begun to reshape global financial structures. Traditional stabilisers such as the US dominance in finance, the regulatory frameworks of the World Trade Organisation (WTO), and Western financial institutions are increasingly under strain. At the same time, emerging alternatives like BRICS+ and regional trade groups offer potential but have yet to establish themselves as a dependable and cohesive foundation.
Recent global shocks like the Covid-19 pandemic, the war in Ukraine, and food and energy price swings have made things worse, especially for developing countries that depend heavily on imports and global supply chains. Until a new balance is found, the world economy will likely remain shaky with ongoing disruptions.
For Egypt, this unsettled environment presents both dangers and opportunities. As a country that depends heavily on imports, carries a large debt load, and sits in a geopolitically sensitive region, Egypt must act carefully and creatively. Traditional economic approaches relying on International Monetary Fund (IMF)-sponsored reforms, Western aid, and Gulf financial support may continue, but they are no longer sufficient on their own. Egypt needs to modernise its strategy to fit the new global reality, which means focusing on three pillars: resilience planning, strategic hedging, and flexible alliances.
Resilience planning must form the core of Egypt’s future economic policy. The goal is to make the economy strong enough to absorb shocks and keep functioning during crises. This includes cutting unnecessary imports, continuing to reduce untargeted subsidies while protecting the poor through direct cash transfers, improving government spending and tax collection, and rebuilding foreign-currency reserves to cover five to six months of essential imports.
Egypt should also broaden its reserve holdings beyond US dollars, incorporating euros and even Chinese yuan to enhance financial resilience and mitigate currency risks.
The second pillar, strategic hedging, means proactively managing the risks of global ups and downs. This could include using financial tools like futures or options to lock in prices for key imports such as wheat and fuel. It also means reducing any over-reliance on one country, currency, or lender. Egypt should broaden its sources of finance and technology and avoid depending too heavily on either the Western or the Chinese financial systems. That way, the country can keep its options open and stay flexible in a world where the rules are changing fast.
The third pillar, flexible alliances, is more political in nature but just as important. Egypt has already built relationships with a variety of partners: Gulf investors, Asian lenders, African trade groups, and international institutions. The goal is not to replace Western ties, but to complement them. Egypt’s recent inclusion in the BRICS+ group and closer ties with countries like China create new opportunities in trade, investment, and finance. These partnerships should be managed carefully, so they add to Egypt’s strengths and make the country ready for geopolitical shifts.
Some parts of this updated strategy may conflict with Egypt’s current commitments under its IMF programme, raising certain conflicts.
Selling public assets may help meet privatisation targets, for example, but it does not necessarily advance the country’s broader economic goals and could undermine key pillars of long-term economic strength such as future revenue streams and national resilience.
Similarly, if Egypt starts doing more trade outside the dollar system or holds more non-dollar reserves, it could also be seen as taking sides in a tense global environment. And while financial tools like hedging can be useful, they need to be handled carefully to avoid hidden risks to the budget.
These potential conflicts are not deal-breakers, but they do require careful planning and open communication. Egypt must stay committed to transparency and the observation of financial standards, while also building more independence and flexibility into its economic system.
Much of this responsibility falls on the Central Bank of Egypt (CBE), which plays a critical role through its monetary tools in keeping prices stable, protecting the currency, and managing capital flows. The CBE must restructure its foreign reserves to take care of short-term outflows. It must also work closely with other financial institutions to monitor risks tied to global instability and ensure that Egypt’s financial infrastructure is ready for a multipolar world.
The CBE also has a diplomatic role to play. It needs to make sure that any new financial moves, such as shifting reserves or exploring new payment systems, are made in a way that keeps international partners informed and reassured. Flexibility should not come at the cost of trust.
Egypt does not need to walk away from the international system, but it does need to adjust its position within it. This means moving from dependence to diversification, from short-term crisis responses to long-term planning, and from fixed alliances to a more open, multi-partner approach.
Egypt has the location, institutions, and potential to make such shifts work. But success will require clear priorities and the willingness to act before the next crisis hits.
The writer is a banking consultant.
* A version of this article appears in print in the 19 June, 2025 edition of Al-Ahram Weekly
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