The Postedia

Egypt is experiencing the biggest economic crisis since the revolution: “everyone lives on the edge”

During the January 2011 protests against Hosni Mubarak’s regime, one of the main demands of Egyptians was “Aish”, which means “life” in Arabic but also refers to bread in the local dialect. More than ten years after the chants of “bread, freedom and social justice” in the streets, the majority of the population is finding it difficult to get that bread and achieve the decent life they aspired to.

The Egyptian pound has lost more than 50% of its value against the dollar in less than a year, hitting an all-time low of 32 pounds per US dollar on January 11. It has risen slightly this week, but the large exchange rate gap affects the country’s economy, which imports many of its raw materials and consumer goods, including staples such as wheat for making Aish.

In fact, Egypt is the largest importer of wheat in the world, and before the war in Ukraine, grain came mainly from that country and Russia. The conflict affected not only imports, but also tourism, which is one of the main sources of foreign currency for the Egyptian state. Visitors from Russia and Ukraine, and from other countries such as Belarus, have not been so numerous since the Red Sea invasion.

At the end of 2022, the Egyptian government again had to go to the International Monetary Fund (IMF) and took a loan of 3,000 million dollars in 46 months, for which it promised to “make the exchange rate more flexible”. The sharp fall in the pound is a response to this flexibility, experts say, and those who are most likely to notice it are ordinary Egyptians, who have been losing spending power over the years. Last December, annual inflation topped 21%, the highest rate since 2017, as the economy absorbed the impact of the first major devaluation of the local currency agreed with the International Monetary Fund in 2016.

A young mother from a popular neighborhood on the outskirts of Cairo tells that everything is more expensive, from food and drink to medicine. “£100 now is £10 before,” says Halla. “It’s a very difficult situation because of the costs. Everyone lives on the edge, and the little things that we used to allow ourselves have become great luxuries,” laments the thirty-year-old girl, who no longer takes her two children to play on weekends. To save a few tens of pounds a week, it’s worth access to most of the capital’s parks and sports facilities.

The only thing it does not give up is the education of children enrolled in one of the cheapest private centers. “I can’t send them to a public school because they’re not going to learn anything. This school is the worst, but at least they get a basic education, that’s what I can afford,” he admits. Hala is a cosmetologist, her husband is a hairdresser, but their income is different and often does not cover the family’s expenses. “Day-to-day life is very difficult,” he concludes.

This January, a kilogram of chicken topped 70 pounds, and corn and sunflower oil skyrocketed, piling up several times since 2022. whose size and quality decrease over a period of time); And in the market, it can cost between £1 and £6, depending on the weight of the pita bread, which Egyptians usually fill with falafel balls or mashed beans to fill their stomachs in the morning.

According to official figures, the poverty rate in Egypt is about 30%, but this figure is before the pandemic. “There are probably many more Egyptians living in poverty now,” Timothy Caldas, associate professor of international relations at the Autonomous University of Barcelona (UAB), told “Ordinary Egyptians have been suffering economic hardship for years, there is no mechanism in the government’s hands to prevent this, all it can do is get more people involved in aid programs and distribute more cash,” he says. The IMF is calling on Egypt to “expand social spending to alleviate poverty and protect the vulnerable,” but two aid programs launched after the 2016 deal have proven insufficient.

Caldas explains that the main problem is that a country like Egypt can take “years or decades” to build an effective care network, so “over time a large percentage of the population suffers without any support.” An Egyptian-American analyst estimates that about 65 million Egyptians live in or near the poverty line, or more than half of the estimated 104 million people. “There is a lot of economic pain and if it is not alleviated as much as possible, it will affect growth because demand will decrease and it will discourage private investment,” he adds.

Bureaucracy, legal insecurity and fear are other factors holding back businessmen and investors, as noted by blogger The Big Faraoh – who has been hiding behind a pseudonym to criticize the government since the Mubarak era. “What if the regime sees that my business is profitable and I end up in a cell with the owners of Juhaina?” he wonders, referring to Egypt’s largest dairy company, whose CEO has been in prison for two years.

Reducing the military’s involvement in Egypt’s economy is one of the big challenges for the IMF, which has found that the state must make room for “balancing” participation between the public and private sectors, and that the latter “drives development.” But, according to Caldas, the generals are “going to do everything to prevent that.” The political economy expert believes that the IMF “shouldn’t issue the next tranches of the loan” if there is no progress in this regard: “The IMF can have a big impact and hold the Egyptian government accountable.”

Since the 2016 accord, the military has expanded its economic empire through the state and companies it owns, and “no substantial economic reform” has been implemented, Kaldas said. “The latest program drawn up by the IMF is for the first time addressing structural issues that have failed over the past seven years,” where the agency “has not been very straightforward in its assessments,” doing Egypt a disservice.

“The political corruption of the regime and the cooperation of powerful countries that offered unlimited access to credits – through the IMF or bilaterally – led Egypt to deep debt and caused great suffering to the country’s population,” the professor condemned. Paradoxically, “Egypt needs to borrow more to get out of this situation, and the suffering for the population will be even worse, because the country is in a much worse state than in 2016.” [cuando el FMI le concedió 12.000 millones de dólares]”, Kaldas says. Al-Sisi’s regime “deliberately undermined the financial health of the Egyptian state and citizens’ access to public services in order to enrich and empower themselves,” he concludes.

Source: El Diario





related posts

Post List

Hot News