Egyptians brace for hard times amid austerity measures
Cairo - Egyptians are looking at a period of hardship as the government unrolls austerity measures, including a floating pound that has drastically depreciated the currency and raised prices, analysts said.
The measures, in return for a $12 billion International Monetary Fund (IMF) loan, had been avoided by governments fearing unrest but President Abdel Fattah al-Sisi said Egypt no longer has the luxury of postponing them.
The Central Bank decision to float the pound, amid a dollar crunch that led to a thriving black market and a slump in imports, caused its value to plunge from 8.89 to the dollar to about 16.
The drastic move, welcomed by creditors and investors, was followed with a fuel price increase.
At a minibus station in Cairo, Mohamed Seddik, a hotel cleaner, asked how he would afford the new prices.
“How am I supposed to live if a kilo of sugar that used to cost 4.5 pounds (30 US cents) now costs 10 (64 cents) and a kilo of rice has risen from 3 to 4 pounds (19 cents to 26 cents)?” said Seddik, who said he earns 1,500 pounds — around $96 — a month.
Analysts said there was no alternative to the tough measures, after years of unrest battered the economy and drove away tourists and investment but the quick succession of measures will spike prices, said Omar el-Shenety, head of Multiples Group investment bank.
“Inflation may rise to 20%, or a little less, over the next year-and-a-half,” he said, up from 14% this year.
American University in Cairo Economics Professor Amr Adly said the measures could deepen the effects of an economic crisis caused by the dollar shortage while increasing inflation.
Egyptians are reeling after months of experiencing shortages of products ranging from sugar to baby formula.
“It’s not just transport, it’s everything, especially basic necessities like oil, sugar and rice,” said Samar, a 30-year-old housewife who was escorting her three children from school.
Al-Mal economic newspaper reported that prices of vegetables and fruits had seen a “record jump”, quoting an official saying transport prices had risen as much as 40%.
The government warned there would be an increase in prices but also said it would make inspections to ensure traders were not drastically raising them. It also announced a 7% salary increase for civil servants, who number about 6 million out of a total population of more than 90 million.
Egyptian newspapers have echoed the alarm over the rising prices.
“Government and parliament mobilise to contain the effects of the earthquake from floating the pound and hiking fuel prices,” read a headline in El-Watan private daily.
Adly said floating the pound brings dollars traded on the black market back to the official market but the crisis will remain.
“An economic crisis led the dollar shortage, not a crisis in monetary policy,” he said.
The country saw repeated and often deadly protests after the ouster of president Hosni Mubarak in 2011 and the toppling of his Islamist successor Muhammad Morsi in 2013.
A jihadist insurgency since Morsi’s overthrow has targeted policemen and soldiers, as well as tourists. In October 2015, the Islamic State claimed responsibility for bombing a Russian airliner carrying holidaymakers from a Red Sea resort, killing all 224 people on board.
Adly said economic indicators should improve in the midterm.
“But that is tied to several factors including an improvement in global economic conditions and the European Union, which is the main importer for Egyptian goods,” he said.