Egyptians face worst inflation in a decade

Egyptians are bearing down under their worst inflation in a decade, cutting spending as much as possible as prices surge on basic food items, transport, housing and even some essential medicines.
Inflation reached almost 30 percent in January, up 5 percent over the previous month, driven by the floatation of the Egyptian pound and slashing of fuel subsidies enacted by President Abdel-Fattah El-Sisi in November.
The move was part of a reform package to secure an International Monetary Fund (IMF) bailout loan of $12 billion desperately needed to shore up investor confidence and overhaul the economy. Immediately after the floatation, the pound lost over half its value, making a wide range of Egypt’s many imported goods double in price.
In the months since, Egyptians have been left with a grim search for ways to tighten their belts and make ends meet, hoping eventually the promised benefits of reform like growth and job creation come.
“People are buying half of what they did before, because it has gotten very expensive,” said Hassan, a butcher who only gave his first name for fear of attracting too much attention.
Food and drinks have seen some of the largest increases, costing nearly 40 percent more since the floatation, figures from the statistics agency show. Some meat prices have leaped nearly 50 percent.
“They are buying less than before. Instead of buying five or six items they will buy two, for example,” said a grocery clerk, Ismael, who gave only his first name for similar reasons. “No one knows what the prices will be next. But hopefully tomorrow things will get better.”
The Egyptian economy has yet to recover from the 2011 Arab Spring uprising that overthrew Hosni Mubarak. Investment and tourism, a pillar of the economy, were both gutted by political turmoil and terror attacks.
Reforms were long avoided by Egypt’s leaders for fear of a popular backlash like the 1977 bread riots that forced the reversal of food subsidy cuts.
There have been some positive signs since the shock reforms were enacted. Investors have flocked to buy Egyptian bonds and foreign reserves are rising. The pound has regained some strength, trading around 16 per dollar as opposed to nearly 20 in late December. People have changed buying habits, purchasing local goods, instead of imports, rendered more expensive by both the exchange rate and newly imposed high import tariffs.
Economists, the government and the IMF predict inflation will ease later this year.
In the meantime, people are using public transport more, moving children to less expensive private schools, avoiding meat, using electricity more thriftily and supplementing some purchases with food handouts from the army.
Khaled Abdou, a physician, described the reforms as necessary and bold steps by El-Sisi. “The unnecessary secondary goods and products, like nuts and all the imported things, we do not mind cutting them out,” he said. “We are not talking about mandatory daily needs.”
But among the poor, those daily needs are being hit hard. Nearly a third of Egypt’s population of 92 million people lives under the UN poverty line of $1.9 a day.
“For people who are more working class or poor, there is less room for belt-tightening at this point since such a large percentage of their salary was already devoted toward purchasing food,” said Timothy Kaldas, a non-resident fellow with the Tahrir Institute for Middle East policy.
Some drugs have gotten harder to find in pharmacies. Manufacturers have slowed down or stopped production on some medicines because higher prices of components make them less profitable or unprofitable, since prices are fixed by the state. Accusations of drug hoarding abound amid expectations the government will have to bump up the prices.
The government appears to be betting it can keep a lid on any discontent long enough for hoped-for growth to kick in.

Source: Arab News