CAIRO — Around the time Egypt’s
currency hit an all-time low, an article this month on the country’s sharp
economic downturn quietly slipped off the front page of one of its flagship
newspapers.
اضافة اعلان
As the editors knew,
Egyptian censors can
be touchy about any public hint of crisis, especially when the government
shares in the blame. The article was buried inside.
Yet
Egyptians hardly needed to read it to
learn that the rug was being yanked from under their feet. Grocery prices are
stratospheric. Money is worth half of what it was a year ago. For many, eggs
are now a luxury, and meat is off the table. For others, burdened with school
fees and medical expenses, the middle-class lives they had worked doggedly to
sustain are slipping beyond their grasp.
“Right now, we see nothing on the horizon.
Nothing,” said Mai Abdulghani, 30, a Cairo-based communications officer at a
development nonprofit. Her husband, a design engineer, is working four jobs to
cover the necessities, and the car and children they had planned on are out of
the question this year.
“All I do is think about how we’ll survive
on our budget just to feed ourselves,” she said. “Every time we visit the
supermarket, my blood boils.”
“All I do is think about how we’ll survive on our budget just to feed ourselves,” she said. “Every time we visit the supermarket, my blood boils.”
The crisis stormed into view in February,
when Russia invaded Ukraine, shaking countries around the Middle East.
The bailoutUnder pressure, the government has been
forced to commit to far-reaching changes that, if carried out, could eventually
generate growth, but are
tormenting Egyptians.
When the war erupted, the Russian and
Ukrainian tourists who once made up one-third of Egypt’s visitors largely
disappeared, along with most of the imported wheat that feeds its population.
Foreign investors fled, taking about $20 billion with them. In a country that
depends heavily on foreign goods, the combination of factors — scarce dollars,
high import prices, and payments coming due on enormous government debts — spelled
disaster.
For the fourth time in six years, El-Sissi’s
government turned to the International Monetary Fund for a bailout, receiving
$3 billion over four years — far less relief than before and with far sterner
conditions.
Egypt had long used dollars to prop up its
currency, the pound, to maintain Egyptians’ ability to buy imported goods. The
IMF has forced it to let the pound’s value slide and fluctuate without
interference.
The IMF’s conditionsIn a demand that strikes at the heart of
Egypt’s power structure, the IMF is also requiring Egypt to sell off some
state-owned companies to raise money and to strip military-owned companies of
tax breaks and other privileges, allowing private businesses to compete.
El-Sissi’s government, which gained power
in 2013 through an army takeover, had handed control over an enormous swath of
Egypt’s resources to the military, which had long operated a sprawling parallel
economy. Those assets included military-owned pasta and cement factories,
hotels, and movie studios, and experts warned this was suffocating growth.
Under El-Sissi, Egypt spent billions on
flashy megaprojects such as a new capital city, highways, bridges, and
presidential palaces, declaring them essential to development. Financed mainly
by debt, the spree enriched military-owned companies without producing meaningful
jobs, housing, or other gains. Now, under the terms of the loan, Egypt has
pledged to cut spending.
“They’re really stuck. Because of the
regime’s reckless conduct in how it’s managed the economy,
Egypt is now extremely vulnerable,” said Timothy E. Kaldas, an analyst at the
Washington-based Tahrir Institute for Middle East Policy. “This IMF deal is
preventing them from failing, but they’re imposing a lot of conditions on that
in a way they hadn’t in the past.”
The Egyptian people’s realitySince the latest loan deal, foreign
investors have slowly returned. Dollars have flowed back into Egypt, and
imported goods are being released from ports, raising hopes inflation will ease
from a recent five-year high of 21 percent.
But most Egyptians will continue to
struggle, as they have for years as the government tightened spending on public
healthcare, education, and subsidies. Despite a $12 billion IMF loan in 2016,
the economy struggled to generate stable jobs or reduce poverty. Even before
the coronavirus pandemic, which walloped Egypt’s economy, began in 2020, the
World Bank estimated nearly 60 percent of Egyptians were poor.
“Everyone at the cashier is talking to each other about the prices in disbelief, about how we’ll survive like this.”
Many more are now descending into poverty,
though
Egypt has lately bolstered welfare programs and postponed cuts to
subsidized bread.
At Abwab Elkheir, a charity that supports
1,500 families across Egypt, donations are falling and costs are rising. The
charity has had to stop accepting new cases and refuse pleas to increase cash
handouts, said its founder, Haitham Al-Tabei.
Last year, the charity began getting more
calls from middle-class families whose salaries no longer cover medical
treatments or school fees.
“These are people who used to be able to
live on their salaries, but suddenly became needy,” he said.
Cutting costsWhen prices began shooting up in March,
Abdulghani, the communications officer, and her then-fiancé decided to get
married six months early. It was a race against inflation: By rushing to wed,
they thought, they could pay one rent instead of two, and furnish an apartment
before appliances got too expensive.
They honeymooned in sunny
Upper Egypt. A
week later, back in Cairo, the cost of the two air conditioners they had wanted
to buy had doubled — they could now afford only one.
These days, a month’s worth of eggs, milk
and cheese costs quadruple what it did a year ago; a month’s worth of beef,
chicken and fish, nearly triple. Abdulghani’s insulin shots cost seven times
more.
“Prices were rising like an uncontrollable
fever,” said Abdulghani, whose master’s degree from a British university was,
not long ago, the kind of qualification that would have all but guaranteed a
middle-class lifestyle. “This is not normal, to pay all that money just for the
basics.”
As
costs rose, Egypt’s pound plunged,
falling from about 16 to the dollar a year ago to almost 30 now. Abdulghani’s
husband has been laid off from four different jobs as companies cut costs. Now
he juggles four new jobs, returning from the office at 6pm only to work
remotely until 1am.
He now commutes on public transit instead
of by Uber, and the couple stopped eating meat half the week. Even so, his wife
estimates they spend four times what they used to on food and transportation.
“Everyone at the cashier is talking to each
other about the prices in disbelief, about how we’ll survive like this,” she
said.
Whose crisis?Jittery about growing resentment from a
public that deposed a president once before, in Egypt’s 2011 Arab Spring
protests, the government has blamed the crisis on the war in Ukraine and the
pandemic. State-controlled TV channels run segments that show Europeans
complaining about inflation, as if to remind Egyptians that even rich countries
are suffering.
“Even if all the military’s official companies were privatized… that will still be a relatively minor dent in the economic resources the military controls.”
“Did we get into any adventures where we
squandered Egypt’s funds? No, circumstances are tough for all the world. This
crisis is not ours,” El-Sissi said in a speech last week. “But Egypt is paying
the price, like all the world’s countries are paying the price.”
He also scolded Egyptians worrying on
social media: “Cut it out!”
But even some normally pro-government
voices have risen in complaint.
“In every Egyptian household, rich or poor,
there is a state of concern and fear for the future,” Amr Adib, a prominent
television host, said on his show this month.
Hope for the private sector’s future?Analysts say Egypt’s promises to increase
private sector growth could bear fruit in some years, if the government does
not dodge or stall on them, as it has many times before. Given the military’s
dominance, it is unlikely to surrender its privileges and profits easily.
Yet Egypt has run out of other lifelines.
Kaldas said the IMF had built monitoring and enforcement mechanisms into the
deal that could leave Egypt little choice but to comply. Though military
factions may resist, he said, the criticism spilling into view from normally
pro-government figures suggests that some in power understand the economy needs
changing.
Even if Egypt makes good on its
commitments, however, the military could preserve control of assets by selling
them off to private companies headed by retired officers, said Sarah Smierciak,
a research fellow at Harvard’s Middle East Initiative. The military already
exercises control over some ostensibly private companies led by such figures.
Egypt also made no pledges to curb military
control of land and natural resources, which are far more valuable than its
businesses.
“Stripping the privileges of these groups
isn’t realistic, politically speaking,” she said. “Even if all the military’s
official companies were privatized — and that is something that will never
happen in the foreseeable future — that will still be a relatively minor dent
in the economic resources the military controls.”
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