"It's getting scary."  how the war in Ukraine plunged Egypt into crisisEntertainment 

“It’s getting scary.” how the war in Ukraine plunged Egypt into crisis

Hanna Ayyad has only a few items in her fridge these days. A fruit seller in Cairo has restricted his family’s diet as inflation caused by the Ukrainian war has soared in Egypt.

“Now we buy new clothes every two holidays,” she said CNN:. “We can go without meat, buy food once a month, and we can buy chicken two or three times a month, it’s not like before.”

Customers can also pay only a fraction of what they previously purchased, reducing their daily income.

“Some people used to buy 5 kg or 10 kg of fruit, now they can buy 1 kg or maximum 2 kg,” he says. It takes him days to sell the same amount of product he used to sell in one day.

Egyptian households of all income levels are seeing their purchasing power diminish rapidly. The economic crisis is raising the prospect of protests in the country, where the regime was toppled just a decade ago in an uprising calling for “bread, freedom and social justice”.

In recent months, dozens of people have protested against delays in new car deliveries due to import restrictions and the devaluation of the local currency. Facebook groups were formed to find local alternatives to pet food when imports were restricted and poor Egyptians like Ayyad, the vendor, cut back on their grocery purchases.

Credit rating agency Moody’s warned of “social and political risks” in May as it downgraded Egypt’s economic outlook for the year from stable to negative. And the government seems to share those concerns.

Ahead of the protests, President Abdel Fattah al-Sisi launched a national dialogue with opposition figures, shifting focus from a crackdown on dissent that has kept thousands behind bars for years.

Wheat import prices have doubled

Egypt’s official inflation rate was 14.7% in June, up from around 5% in the same period last year, but consumers say prices have risen above that figure since Russia’s invasion of Ukraine began in February.

On the other side of the capital, at a fancy supermarket, Haya Aref is looking for cheaper local alternatives on her shopping list. In the past, he noticed a 10 to 15 percent price increase every 6-8 months, but now the price increases have become more frequent, he says.

“I used to buy an international brand [de cereais] which probably cost about 70 or 80 Egyptian pounds (about US$4), which has now gone up to 250 (US$13),” says the 23-year-old architect. He cut out protein and snacks to meet his monthly budget. For him, locally grown vegetables have become an affordable and healthy option.

The war in Ukraine has brought uncertainty to global grain markets and raised prices. Egypt, which depends on Russia and Ukraine for 80% of its wheat imports, now pays $435 a tonne, up from $270 a year ago, according to the government.

Wheat production in a field in Egypt’s Al Qalubiya province / 02/06/2022 REUTERS/Mohamed Abd El Ghany

Tourism has suffered

The invasion also crippled Egypt’s tourism industry. At one time, Russian and Ukrainian tourists made up a third of the country’s annual visitors, but that number has declined.

At a time when the economy was barely recovering from the slowdown caused by the Covid-19 pandemic, the war imposed its own enduring challenges on the rise.

Rising interest rates in more stable markets like the United States have taken about $20 billion out of Egypt, according to credit rating agency Standard and Poor’s.

“Over the last five to six years, we’ve relied heavily on what we call hot money. I call them hidden foreign debts,” explains economic analyst Salma Hussain. “When you have a very profitable interest rate [a dívida do governo], you invite people from all over the world to a party. These people are always at the exit door of the party, when something shakes or changes, they are the first to leave.”

This left the government reeling under a cash and debt crisis that was 85% of the size of its economy. With foreign reserves dwindling, the government initiated a limited devaluation of the Egyptian pound, which saw it lose 17% of its value in a matter of days in March.

Along with other government measures to control the flow of foreign currency out of the country, this made imports very difficult, affecting both consumers and producers.

“We all need to know that the gravity of the crisis is not only in Egypt, but worldwide,” Prime Minister Mostafa Madbouli told a televised press conference in May, describing the government’s response to the economic crisis as “unprecedented.”

The direct and indirect impact of the crisis will cost Egypt 465 billion pounds ($24.6 billion), including providing a social safety net for citizens, he said.

Containers move through the Suez Canal in Egypt / Containers move through the Suez Canal in Egypt, 2/15/2022 REUTERS/Mohamed Abd El Ghany

The government is seeking more loans, mainly from the International Monetary Fund, which has given Egypt $20 billion since 2016. Gulf Arab states have poured billions of dollars into the country to replenish their dwindling foreign reserves since February.

Most of the UAE’s money comes in the form of investments and acquisitions of large Egyptian companies. The Egyptian government wants to see more of this. Madbouli outlined a plan to offer shares in state and military companies, including seven ports, to raise $40 billion over four years.

For Hussain, an economist, this is a quick fix to cover the debt without addressing the underlying problems. “I am not worried about the collapse of the Egyptian economy. I’m worried that more people will fall below the poverty line,” he says.

One of the government’s main efforts right now is to get subsidized bread wheat to 70 million Egyptians in a country of about 100 million. The government is encouraging local farmers to grow wheat and sell it to the government to fill the expected grain import gap.

Ayad, a street vendor, relies on basic government subsidies and cash donations. As her income declines, she also cuts back on spending on her children’s education. He anxiously follows the news and fears that the situation could worsen.

Architect Aref feels Egyptians are in survival mode “and it’s getting a bit scary”.

*With information from Magdi Saman

This content was originally created in English.

original version

Related posts

Leave a Comment