Egypt’s rising inflation reduces welfare of population
2023.01.19 13:27
Egypt’s rising inflation reduces welfare of population
By Kristina Sobol
Budrigannews.com – Om Mohamed’s family used to vacation at resorts on Egypt’s Red Sea coast in better times.
Vacations are now out of the question. Om Mohamed, 61, and her husband, who lives in an apartment near the Cairo ring road with their two grown sons, are reducing their consumption of meat in an effort to survive on his meager pension from an energy company.
Egyptians, who had already been subjected to numerous economic shocks and years of austerity, have seen their spending power severely impacted over the past few months by accelerating inflation.
It has revealed the vulnerability of an economy that has been supported for a long time by international lenders and Gulf allies who view Egypt as a lynchpin of regional security, in addition to a currency crisis.
The government frequently attributes the current pressures to external factors connected to the war in Ukraine, claiming that it is doing everything in its power to reduce prices and increase social spending.
It also hints at a state-led infrastructure boom that helped Egypt’s economy endure the coronavirus pandemic by creating new cities and roads.
That offers Om Mohamed little consolation. Now, her husband gets up early to wait in line for bread that gets a lot of help. Since there are no public schools in the area, one of her daughters, who lives nearby, has been selling jewelry to pay for the education of her young children.
We do not have clean water or a functioning sewage system. Om Mohamed said this during an interview at her apartment in a trash-strewn street on the northern outskirts of Cairo. “I can’t afford to buy bottled water every day because sometimes I open the tap and the water smells like sewage,” she said.
She continued, “There is no longer a middle class, and only upper-class people are able to live right now.”
Egypt’s foreign currency crunch was exacerbated by the aftermath of Russia’s invasion of Ukraine in February 2022. As a result, foreign investors who were already cooling off quickly withdrew more than $20 billion, a tourism recovery was halted, and the cost of key imports increased.
Egypt sought support from oil-rich Gulf states and the International Monetary Fund for its latest round of devaluations, which were allowed by the central bank.
Since March, the Egyptian pound has dropped by nearly half, and annual headline inflation has risen above 20%, its highest level in five years. However, consumers are seeing much steeper price increases for many goods, including basic food items that some stores have begun to ration.
Egypt, which has a population of 104 million people, is one of the hardest hit countries, despite the fact that many countries are struggling to contain inflation.
According to official data, approximately 30% of Egyptians were living in poverty as of 2020. Economists estimate that poverty is increasing and that many more people are living below the poverty line, despite the fact that no official figures have been released since the pandemic.
Reuters got in touch with two charities, and they said they were having trouble raising money and were worried they would have to cut back on services.
The Abwab El Kheir Foundation, one of the charities, said that some people who used to donate were now looking for help themselves, making it harder for it to provide meals, medical care, and other support to 15 Egyptian cities.
“In the last three months, there have been twice as many requests for assistance as there were during the same time last year. Before delivering meals to a working-class neighborhood in central Cairo, Haitham el-Tabei said, “All of these people have a source of income, but it’s becoming too little to sustain a living.”
While former army chief President Abdel Fattah al-Sisi, who overthrew Egypt’s first democratically elected leader in 2013, has acknowledged that the situation is difficult, he has stated that the difficulties are not the state’s fault.
A recent government directive suggesting chicken feet as a cheap and protein-rich option for struggling households drew satirical jibes on social media, as did comments by Sisi last week telling Egyptians to “stop yapping” about the economy.
It would be risky if there were any outward signs of public opposition at this point. Public demonstrations are effectively outlawed and social media accounts are monitored as a result of tight security measures implemented by Sisi during his extensive crackdown on political opposition.
Still, Egypt’s plans to try to turn things around after the political and economic upheaval that followed its 2011 Arab Spring uprising are made more difficult by the prospect of additional economic turmoil in the short term.
The country just started a new IMF deal that includes $3 billion in financing that will be paid back in installments after reviews. The goal of the deal is to get the government to cut spending and debt, switch permanently to a flexible exchange rate, and make structural changes, like reducing the state’s and military’s economic role.
Additionally, the agreement calls for an increase in social spending to safeguard the vulnerable. However, if inflation remains higher than anticipated this year, it could prompt IMF discussions and increase budgetary pressures by requiring the government to spend more on subsidies.
This week, those without subsidy cards began receiving cost-price loaves from the government, which heavily subsidizes bread for over 70 million citizens. More than five million families are now eligible for a cash allowance, according to government officials.
However, for many, this support is insufficient.
The director of the charity, el-Tabei, stated, “The charities cover a large portion of the needs in Egypt, even for those who receive pensions and the various government allowances.”
