For struggling Egyptians, devaluation promises price pain
06/03/2024 15:38
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Egyptians have endured years of hardships
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Sisi is focused on mega-projects
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Egypt receiving billions of dollars from UAE fund
By Farah Saafan
CAIRO, March 6 (Reuters) - Egypt's move to devalue the
pound was met with frustration online and on the streets, with
Egyptians complaining about everything from the cost of diapers
to the price of chicken after years of struggling with low wages
to afford them.
President Abdel Fattah al-Sisi let the Egyptian pound plunge
in value in a bid to restore economic stability to the most
populous Arab state with the help of billions of dollars of Gulf
investment inflows.
However some Egyptians wonder whether such high-profile
moves will provide relief for them after years of hardships.
"This will magnify the suffering of citizens," said Eman
Hussein, a doctor. "They should have held off on this step for a
while because if the government doesn't make dollars available
then we will find ourselves back in the same spot."
Egypt's central bank said it had hiked interest rates by 600
basis points and would let the pound trade freely.
The bank said its actions were "backed by the steadfast
support of multilateral and bilateral partners" and "sufficient
funding has been secured to avail foreign exchange liquidity".
Egypt has in the past said it would move to a more flexible
exchange rate, only to return to closely managing the currency
whenever the pound weakened.
This time, it may be betting that hard currency inflows from
investment projects including a $35 billion deal with the United
Arab Emirates signed in late February will prevent a freefall.
The announcement on Feb. 23 that Emirati sovereign fund ADQ
will invest $35 billion within two months in the development of
a new city on Egypt's north coast and other projects eased
pressure on the Egyptian pound on the black market.
The Egyptian government says $10 billion of that money has
already been transferred.
"We got $35 billion -- can you please reduce the price of
diapers?," said a post on X.
Also on Wednesday, the International Monetary Fund (IMF)
approved a much-awaited $8 billion dollar loan to Egypt,
increased from $3 billion previously.
SISI SAYS PROJECTS WILL PROVIDE JOBS
Egyptians have endured economic hardships for years while
Sisi spent billions of dollars on a new capital city, bridges
and other infrastructure.
The flagship project is a $58 billion New Administrative
Capital rising in the desert east of Cairo, a site Sisi said
would mark the birth of a new republic.
Many have seen living standards slide and struggled with
steep price increases for everyday goods and services. An
estimated 60% of the 106 million population is beneath or close
to the poverty line. Prices for essential goods have soared.
As Egyptians endured hardships, Sisi told people to bear the
economic pain and that his mega-projects would provide jobs.
"Don't we eat? We eat. Won't we drink? We drink, and
everything is functioning. Things are expensive and some things
are not available? So what?" said Sisi, who took power after
leading the overthrow of his democratically elected predecessor.
While the UAE money flowing in may produce relief for Egypt,
some people are sceptical.
"Even if the devaluation will have a positive impact on the
economy, it will still negatively impact citizens. Another
devaluation and further increases in prices of all goods while
wages are low," said Hussein
Breaded chicken, popular among the middle class, was a major
indicator of market stability. The rise in prices alarmed
Egyptians.
It generated jokes on X shortly after the economic measures
were announced. "The dollar amounted to 50 pounds at banks and
the world is in ruins. But his mother asks, will the price of
breaded chicken fall or rise?" someone wrote.
(Writing by Michael Georgy, Editing by William Maclean)
((michael.georgy@tr.com; +971 52 503 5332; Reuters Messaging:
michael.georgy.thomsonreuters.com@reuters.net))