Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

The Economics Behind October War Victory- Report


Wed 06 Oct 2021 | 11:50 PM
Taarek Refaat

The economic gains achieved by the victory of the October War were the result of a fusion between a genius administration, a great military mindset, that was able to take advantage of the least economic potential to serve Egypt’s ambitions.

There was a need for a broad and distinct economic restructuring, at that very moment in history that would preserve the Egyptian state and provide the necessary funding for the war with the ability to provide the basic needs of the Egyptians.

It is undeniable that the role of Aziz Sedki, then prime minister, along with Finance Minister Abdel Aziz Hegazy (1968-1975) in implementing an economic strategy aimed at rationalizing government spending, to raise the necessary funds for the armed forces.

Finance Minister Abdel Aziz Hegazy with President Sadat and King Faisal

During the October 1973 war, the Egyptian government issued bonds to finance the war’s obligations, including investment certificates for community participation under the slogan “Participate in the national epic struggle”.

The bond categories included 50 piastres, one pound, 5 pounds, 10 pounds, and 100 pounds, at an annual interest rate of 4.5%, exempted from taxes. The government managed to collect EGP 7 million since the start of the war, which was quite a good amount at the time.

PM Aziz Sedki with President Sadat

An economist at Cairo University Mohamed Mahmoud pointed out that no war can be fought without economic funding that provides the basic requirements for combat, including daily civilian necessities, leading to a direct and indirect impact on the state’s economy not only in wartime but, in the aftermath of the battle.

Without the October war, the investment map in Egypt would have changed. National industries contributed to increasing exports and the self-sufficiency of products, contributing to the reduction of unemployment rates and rising living standards.

Sadat investigates battlefield during October war 1973

During the Sinai battle, the total deposits of banks rose to EGP 400 million, and the volume of investment certificates recorded about EGP 27 million, while the prices of consumer goods rose about 2%.

On the other hand, the Ministry of Planning announced a plan to increase the national income by about 6%, to register at that time about EGP 6,206 million, and the allocation of about EGP 100 million for the implementation of the subway project, one million pounds for the private sector projects, and a billion Pounds annually for the armed forces.

7 rationalization procedures were put into effect

On February 11, 1973, the Prime Minister, announced before the parliament, the "budget of war", clarifying the following:

-The conversion of the public budget to the budget of the battle to provide all the demands of the armed forces during the war.

-Maintaining the confidentiality of the army’s budget data during the war.

-Funding all requirements of the war, such as health, displacement, security, transportation.

-Reviewing the export and import plan to provide foreign exchange.

-Working to replace local products as an alternative to imported, including the reduction of investments.

-Postponing the implementation of long-term development projects that have no return in the same year.

-A new reduction in the types of spending in government departments and the public sector, including the reduction of travel and transportation credits, holiday and seasons expenses, including decorations and prizes.

Egyptian pound issued on 29 Sept. 1973

Government austerity

The government did not limit itself to reducing spending, On March 12, 1973, new measures were taken by the government in preparation for war, which were as follows:

-Reducing the allocation for water, lighting, and transportation, whether by rail or other means of transport by 10%.

-Cutting funds for advertising and ceremonies by 25%.

-Reduction of funds allocated for holidays and seasons by 75%.

-Review the maintenance allocations for the facilities of the Ministries of Irrigation, Housing, Petroleum, and the Postal Authority, provided that these parties commit to achieving an additional reduction in expenses related to procurement requirements of 2% and 5% for operating requirements.

-Review all investment projects mentioned in the budget of 1973, and postpone any projects that do not serve the battle.

The total cost of the October/Yom Kippur War was estimated at USD 7 billion (USD 40,448 billion today), while the total cost of American equipment sent to Israel was estimated at USD 800 million (USD 4.52 billion today)

On October 19, US President Richard Nixon authorized major arms supplies and USD 2.2 billion for Israel. In response, Saudi Arabia declared an embargo against the United States, leading to the 1973 oil crisis.

 

 

Sadat during a parliamentary speech in 1973

The most important economic gains achieved by the October 6 war were the oil revenues from the Red Sea and Sinai drilling since the Israeli withdrawal until now.

Tourism revenues also increased after Israel’s withdrawal from the peninsula, as well as the restoration of seaports and the revival of domestic and foreign trade, as well as the restoration of fishing off the Egyptian coasts.

In 1975, the Suez Canal was re-opened for international navigation, accumulating more revenues to the Egyptian state, recording around USD 5 billion and 728 million in 2018.

Following the war, cities on the canal and Sinai were resettled and developed. Foreign investment and national industries were encouraged. Opportunities were opened for the construction of industrial cities, and new urban communities.

President Sadat cheering supports from the presidential limo

Hand in hand, all Egypt, including the armed forces politicians, economists and investors lead to the victory of the Ramadan war.

According to the White house military briefing and The Yom Kippur War by Abraham Rabinovich, Israeli casualties were 2,800 dead, 8,800 wounded, 293 captured.

As of October 1973, as many as 1,063 tanks, 407 armoured vehicles and 387 out of 440 aircraft were destroyed from the Israeli side.