Six years have passed since the International Monetary Fund (IMF) launched its first loan program in Egypt under the presidency of Abdel Fattah al-Sisi. In the interim, the IMF began a second loan program, and it is now about to start a third. Clearly, something is amiss in Egypt. But the deeper problem may lie with the IMF. The IMF’s failures in Egypt are a cautionary tale, highlighting glaring deficiencies in the Fund’s current approach to economic planning.

The Egyptian regime spent the past several years using the country’s expansive access to credit to finance a vast array of poorly studied megaprojects and infrastructure projects that were often directly contracted to regime-owned enterprises, particularly military-owned companies. The Egyptian state has thus become saddled with an unsustainable amount of debt for which servicing the interest alone has regularly consumed around half the state’s revenue. The regime-owned enterprises, meanwhile, were generally exempt from corporate taxes, value-added tax (VAT), and customs, further depriving the state of much needed sources of revenue.

Indeed, the graft was so flagrant and damaging to the state’s fiscal health that the new IMF program has specific restrictions on the government initiating new projects. The new program finally begins to touch on the clear governance and political economic sources of Egypt’s long-standing and growing economic troubles, including the expanding economic empire of Egypt’s military. The trouble is that in the time it took for the IMF to start to entertain a serious response to these glaring issues, the regime increased Egypt’s external debt by more than $100 billion.

This happened not despite the IMF, but because of it. Egypt’s ability to borrow such vast sums was facilitated by the Fund’s consistent endorsement and praise of its economic reforms, beginning with the first poorly designed loan program, which the IMF announced Egypt had “successfully completed” in July 2019. Despite the claims of Egypt’s success, in 2020 the country had to turn back to the IMF for two injections of cash amounting to nearly $8 billion in additional financing. This came after worried investors in Egyptian debt fled the country with around $14 billion in just six weeks at the start of the COVID-19 pandemic. Last December, the IMF’s executive board approved yet another loan program for Egypt, with $3 billion from the IMF and another $14 billion in additional financing from Egypt’s international and regional partners. Earlier in the year, following Russia’s invasion of Ukraine, investors suddenly exited Egypt with around $20 billion. Last year, Bloomberg and Bank of America’s Transforming World Atlas both warned that Egypt was among the top five countries at risk of default.

For a financial institution primarily focused on implementing programs meant to produce “macroeconomic stability,” that’s a lot of fragility in the IMF’s supposed success story.

One can reasonably argue that the pandemic and Russia’s invasion of Ukraine were historically unique moments that produced exceptional shocks that were not the fault of Egypt’s government or the IMF. The trouble is that most of the IMF’s other objectives in the 2016 program were already showing signs of failure in 2019.

A central objective of the program was to produce “private sector-led growth” in Egypt; however, in the month ahead of the IMF’s declared success, Emirates NBD Purchasing Managers’ Index surveys showed that the private sector actually contracted. Indeed, Egypt’s private sector has contracted for 75 of the past 84 months, or seven years. The 2016 program was meant to “to create jobs and increase labor market participation, especially among women and young people.” In reality, overall labor force participation declined from 47 percent in 2016 to 42 percent by 2019, and during that time, labor force participation declined especially among women and youth, dropping from 23 percent to 16 percent and from 30 percent to 22 percent, respectively. The IMF said its 2016 loan would promote “inclusive growth.” In 2016, the poverty rate was 27.8 percent, increasing to 29.7 percent in 2019-20, according to government statistics. The World Bank estimated in 2019 that 60 percent of Egyptians were living near or below the poverty line.

In a belated acknowledgement of the structural problems that were left unaddressed, the IMF appears to finally have moved away from reducing Egypt’s poor performance to external shocks, stating in the report for the newest program that the “outbreak of Russia’s war on Ukraine crystallized pre-existing pressures,” recognizing that the central problems undermining Egypt’s economy were in Egypt and not due to external shocks. However, this comes after several years of the IMF and its shareholders untenably praising Egypt’s economic performance, thus helping the regime to visibly enrich itself while devastating the fiscal health of the Egyptian state and impoverishing the population, which has had to contend with repeated bouts of austerity, eye-watering inflation that at times exceeded 30 percent, and the repeated collapse of the country’s currency.

Egypt’s leaders are responsible for their actions against the interests of the country and its population, but the IMF and its shareholders are also responsible for the role they played in enabling and, in the case of some shareholders, profiting from this devastating debt fueled spending spree. Egypt’s generals didn’t just spend to enrich themselves. They spent to win friends in key capitals. From 2012 to 2021, Egypt made nearly 12.3 billion euros (about $13.2 billion) in arms orders from France, nearly as much as the entire European Union in the same period. In 2021, a record-setting year for German arms exports, 46 percent of German arms exports went to Egypt.

There needs to be accountability at the IMF. If we assume the best of the fund, then it was woefully ill-prepared and ill-equipped in 2016 to design a program for Egypt. This third program is remarkable in that it finally dares to attempt to rein in regime-directed graft, but it’s also remarkable that it took three programs and more than six years for the fund to realize this was necessary. The IMF needs fewer economists and far more country specialists, political economists, sociologists, and historians building future programs. Any political economist working on Egypt could have identified many of these risks, long before the first tranche was disbursed in 2016.

The economic and political economic literature on Egypt is extensive. Political economists have been writing about the military’s problematic and increasingly entrenched economic empire for decades. A book published by the World Bank as far back as 2004 identified that women throughout the Middle East and North Africa—but particularly in Egypt—depended on public sector employment as a driver of their growing rates of labor force participation. Predictably, the IMF’s routine prescription of cutting the public wage bill then led to a sharp decline in female labor force participation. This risk should have been anticipated and addressed in the program’s design. Instead, female labor force participation was left to collapse sharply and has yet to show any sign of recovery.

Development is challenging work under the best of circumstances, but ignoring or being unaware of the raft of existing literature that should have allowed IMF planners to anticipate the failure of their programs is inexcusable. Learning on the job while millions of Egyptians fall into poverty and their state is riddled with debt used to fund vanity projects such as Africa’s tallest tower, the world’s longest monorail line, and a series of new presidential palaces for the country’s brutal autocratic president is unacceptable.The IMF, as it often prescribes, needs “deep structural reforms” itself, and it must undertake them quickly. Otherwise, it’s only a matter of time until it impoverishes another country while wagging its fingers at the country’s leaders, as if the fund didn’t share responsibility for what took place.