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Egypt, Increasingly Poor

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Egypt, Increasingly Poor

Written by Amanda Figueras and Aitor Hdez. Morales

The deteriorating economic situation in Egypt — noted especially in terms of the dramatic rise in prices and devaluation of the Egyptian pound, as well as in the fall in foreign currency reserves — is reflected in the dour mood of Egyptians and within their local supermarkets, where it is increasingly normal to find that basic products have gone missing.

Elimination of energy subsidies has made prices go through the roof, further complicating life in the impoverished land of the pharaohs, a place where the middle class shrinks with every passing day.

Although statistics that document just how bad the situation is have yet to be released, the intensity of the crisis is already evident on the streets. Inflation soared after the central bank liberalized the pound’s exchange rate in November, doing away with the anchored value. In January, the annual rate of inflation reached 29.6%, a high not seen since 2008, well before the revolution, while the monthly rate rose 4.3%, driven by an 11.5% increase in milk, cheese and eggs prices, 9% in grain and bread prices and 6.4% rise in meat and poultry prices.

Just one day after the pound’s liberalization, fuel prices shot up between 30% and 50%. A liter of 92-octane gasoline that cost 2.60 pounds suddenly cost 3.50 pounds, while the 90-octane liter went to 3.35 pounds from 1.60 pounds, and diesel rose to 2.35 pounds per liter from 1.80 pounds per liter. Egyptians also faced new hardships at home, with the cost of butane gas canisters also doubling. In just one night, the cost of electricity rose between 25% and 40%.

Accumulating savings, an impossible prospect

Ragaa, 37, always makes sure to hold on to her shopping receipts. She even takes care to jot down the price of small items, including what she spends on bread (fatir), a kind of mille-feuille that can be served alongside sweet and savory dishes. By way of her careful accounting of day-to-day life, this Cairo native has tracked the steady downturn of her domestic budget, struggling to make ends meet in an environment that has made accumulating savings an impossible prospect.

For years, Ragaa has worked as a translator, putting aside all that she earned to pay for a house she bought several years ago. While that money was more than enough in the past, now she fears that the day will come when she can no longer afford to make the payments to keep her home.

Ragaa’s husband, a manager in the marketing department of a food company, earns a relatively good salary, bringing home around 6,000 Egyptian pounds a month (about $317 according to the exchange rates in mid-January). They do not have children, so they do not have pressing expenses beyond the 2,000 pounds they pay for their 3-bedroom apartment in a new area on the outskirts of Cairo.

A fruit market in Cairo > Flickr/Tinou Bao

Their objectives seem easily met, but in fact the couple is struggling. Each month, they spend roughly 1,800 pounds on food, 800 pounds for internet and phone, 300 pounds for community expenses, electricity and water, and some 800 pounds for transportation. In the end, the couple is left with 1,200 pounds ($63) a month for everything else, a sum that Ragaa says is simply not enough to live on.

The couple has always lived frugally. Once a month they used to treat themselves to the local cinema. Now that small pleasure seems like an unthinkable luxury. “If I have any money left over, I save it in case we need to go to the doctor,” Ragaa admits. “A consultation can easily cost 300 pounds.”

Still, Ragaa and her husband are among the lucky ones in Egypt. They have a house and a car, and they both work. But they are part of the growing millions of Egyptians who see their standard of living getting worse day by day. They were once part of the middle class. Now they are working professionals who can no longer afford a new pair of shoes, to go out to dinner or take a vacation.

Sarah, a teacher’s assistant who earns 1,400 pounds a month, falls into the same category. Her husband works for the government and is paid 500 pounds a month. One of her companions loaned her 1,000 pounds a short time ago to pay off debt she accrued when she received a subsidized home. The couple has two children: one is married and one is in school. According to national statistics, Sarah is not poor. Numbers aside, however, the teacher’s assistant often cannot afford to eat.

The poverty rate rises to 27.8%

According to Egypt’s statistics office, the Central Agency for Public Mobilization and Statistics (CAPMAS), the national poverty rate rose to 27.8% in 2015 from 26.3% in 2012/2013. The poverty line has been set at 482 pounds a month, up from 326 in 2012/2013. According to CAPMAS, subsidized products like oil, rice, sugar and flour prevent an additional 4.6% of the population from going below the poverty line.

Many Egyptians mourn when they recall just how much their standards of living have worsened since the revolution that overthrew Hosni Mubarak in 2011

In early August 2016, President Abdel-Fattah el-Sisi said tough fiscal measures lay ahead. He was not lying. The cash-strapped government secured a loan of $12 billion from the International Monetary Fund for three years, but the conditions require that Egypt reduce its deficit. “All the difficult decisions that many hesitated to take over many years … I will not hesitate to take for one second,” Sisi declared.

At the end of August, parliament approved a reform package that included a value-added tax (VAT), setting it at 13% that current fiscal year, with an agreement to increase it to 14% the next year. “The government has neither the political capacity nor the practice of levying direct taxes, so it does so through indirect ones,” Amr Adly, an Egyptian analyst at the Carnegie Center for the Middle East, told the Spanish news agency Efe.

Billboards had appeared on Cairo’s main roads presenting government slogans meant to bolster the population during tough times. “With courageous measures we shorten the way.” “Fear and skepticism lengthen the way.” But the billboards’ uplifting slogans and vigor are no match for the population’s frustration with the desperate economic situation.

Impoverishment of an already weak middle class

The dramatic price hikes are a matter of daily conversation on the streets. It seems as if everything is more expensive, from electricity, water and transportation to clothing, school supplies and medicine.

For most, the only way to get by is to adjust to the new situation and renounce any and all luxuries. Goodbye to the occasional bar of chocolate, the brand-name detergent, the tin of quality tuna

Adly says that application of the VAT will have a particularly harsh effect on the middle class, which consumes more than is strictly necessary and will have to pay much more to afford everyday items that have now become luxuries. Meanwhile, the unemployment rate remains stuck at 13% and the once thriving tourism industry continues to die off.

Many Egyptians mourn when they recall just how much their standards of living have worsened since the revolution that overthrew Hosni Mubarak in 2011. Some even say they would like to see another military coup take place. They’ll support any regime that will rid the nation of its currently dark and uncertain future.

Meanwhile, families survive as best they can. Lisa is a Canadian who has been married to an Egyptian for over a decade. She lives in Cairo but goes to Canada four months in a year to work and save money, funds needed to survive the rest of the year in Egypt. Her husband earns 2,000 pounds a month as a cook. They have a son in a government school.

“Education is horrible here,” Lisa says. “Consequently, we have four private tutors who teach my son. They come over six times a week and each one charges 30 pounds an hour. Life is hard.”

A deliveryman in Cairo > Flickr/M M

For most, the only way to get by is to adjust to the new situation and renounce any and all luxuries. Goodbye to the occasional bar of chocolate, the brand-name detergent, the tin of quality tuna. Each day, more and more things are beyond the reach of the middle class.

Mustafa and his wife are pharmacists. He has a Masters degree, but he earns only 5,000 pounds a month, a pittance for someone who must maintain a family of five. They get by because the house in which they live is paid in full, and because they have a lot of patience.

“A [kilogram] of meat used to cost 45 pounds; now it costs 100. Milk has risen from 7 to 12 pounds, and chicken from 25 to 50,” laments Mustafa, who is sure the situation is only going to get worse. “We are in this crisis because they have taken bad economic decisions, and they continue to make grave mistakes.”

The country now depends on foreign loans from the IMF and the World Bank, which entails a series of austerity measures – Salma, who works at a food bank

“There are no signs of improvement,” says Mohammed, who works in sales. “The corruption is there and no one does anything about it. It is we, the people, who are going to continue paying the tax increase and the rise in prices. The military, the police and the people who work within the judicial system are safe. But what about the rest of us? Is the country not ours as well?”

Even those with high wages tighten their belts.

Ahmed Abodeif and his wife Neveen Gwely, both pharmacists, make almost 15,000 a month to maintain their family of four. Yet even they struggle, saving only about 600 pounds, and they see the situation as “catastrophic.”

Salma, a single, half-Egyptian, half-Jordanian, earns no less than 25,000 pounds in an international bank, but she, too, complains.

“The mismanagement of the economic situation and the cessation of the inflow of dollars from tourism, the Suez Canal and the remittances of foreigners has aggravated the situation. The country now depends on foreign loans from the IMF and the World Bank, which entails a series of austerity measures. Imports weigh much more than exports and we will see inflation rise further,” she said.

Product shortages

Products in Egypt have not only become more expensive. In some circumstances, some key items have disappeared altogether. For several months, it became impossible to find sugar, a staple used in the local tea. Its scarcity was perhaps a blessing in disguise. The World Bank estimates that 16.7% of the population has diabetes; it is common to put up to four teaspoons of the stuff in drinks.

Photos of empty supermarket shelves abound on Facebook and Twitter. There are signs in many shopping centers explaining that there is a limit to the number of certain products shoppers can buy. The Seoudi market chain, for example, limits customer purchases to two units of sugar (the price increased to 14 pounds per kilo from 4), oil and rice (didn’t happen). The same measure has been put into place at other chains, including Momen and Bashar, HyperOne & Oscar Grandstore.

In stores where subsidized staples — such as rice, oil, flour, pasta and sugar — are sold, theoretically only for low-income Egyptians, shoppers head over early in the month to get sugar. “You have to go on the first of the month, before they run out,” explains Nabila Nabeel, a client of one a shop in the popular neighborhood of Shoubra in Cairo. “If you wait, you won’t be able to buy anything at all.”

In this tense climate, authorities have begun to seize sugar, snatching products from companies and merchants accused of hoarding reserves to force price hikes.

One man was arrested for carrying too much sugar down the street. He was observed transporting 10 kilos of subsidized sugar in public, far too much for personal use, according to the police report. The man’s lawyer explained that it was for the cafe where he worked, but authorities have accused him of trying to sell the product for personal profit. He was released after posting bail and is awaiting trial.

Sugar imports in Egypt at the Port of Mombasa. >Flickr/Commonwealth Secretariat

Egypt consumes about 3 million tons of sugar a year but produces only about 2 million tons; imports supplement the difference. Traders told Reuters that in recent months, the high global price of this raw material and the growing black market was making it very expensive and risky for many importers to compete.

Sugar from seizures at factories and warehouses is resold to the public at subsidized prices. By October 2016, the total amount of sugar seized exceeded 9,000 tons.

But sugar isn’t the only product that is lacking in Egypt. Medicine has also grown scarce.

The price of medicine is fixed at a national level, but with the currency depreciating, private manufacturers have threatened to cease production if the market continues to solely generate losses.

After negotiations, the government decided to raise the price of 3,000 medicinal products, 15% of which are produced in the country and 20% are imported.

The last time Egypt liberalized the pound was in 2003. According to an analysis published by Egyptian daily Mada Mars, the measure boosted export profits 46%. Economists say other factors, independent from the currency, intervened in this development, including the general improvement of the international investment climate.

On the other hand, a 2007 World Bank study on the impact of the devaluation of the pound between 2000 and 2005 showed a decrease in family consumption by an average 7.4%, while the percentage of poor families increased to 21.8%.

Most recently, the government increased the underground metro ticket price 100%, to 2 pounds (11 U.S. cents) from 1 pound, significantly affecting in the poorest. In March, hundreds of Egyptians protested after a change to the management of bread rations raised concerns that the government was really trying to cut food subsidies.

The “bread crisis,” though short, was a clear signal about growing public discontent over soaring prices and economic mismanagement.

Sisi’s approval ratings have decline and he is no longer perceived as the hero who rescued Egypt by helping overthrow the Muslim Brotherhood president.

*Image: Egyptian protesters in February 2012. >Flickr/Allisdare Hickson. 

This piece appears in our Winter 2016/2017 print issue.

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