Egypt is suffering a foreign currency crisis – and with much of its food and energy imported, that is causing big problems.
The Egyptian pound has been losing value, particularly against the dollar. The central bank’s reserves are getting dangerously low as it spends them on keeping the exchange rate artificially strong and financing imports.
Fewer tourists because of the security situation also means less foreign currency coming into the country.
Financial expert Dr. Mohammed Al-Najar told euronews: “The current economic situation seems to be the main reason for this crisis, but we also can’t ignore the effects of the political and security problems. That’s also caused economic worries which means foreign investment is not coming into the country.”
The shortage of dollars and the Egyptian pound falling much lower than the official exchange rate on the black market means ordinary middle-class and poorer Egyptians are paying the price – literally.
Shelves are emptying of imported food and people’s purchasing power has been chopped.
A Cairo butcher expressed his discontent: “We expect prices to rise further in the near future, how will people live then? Where will they get the money? Water and electricity prices have risen, everything’s going up.”
And a shopper complained: “How will we live in this situation? How can I guarantee my family has enough to eat? Where are the cheap prices we were promised? The dollar rises and we’re left eating stones.”
Affordable food is an explosive issue in Egypt. Economic discontent has helped unseat two presidents in five years.
In addition, businesses are finding it difficult to operate as the lack of dollars means they cannot import materials. General Motors recently suspended operations in Egypt for a week because of a shortage of foreign currency.
It was the first shutdown of its kind in the more than 30 years that GM has been operating there. The company has a nearly 25 percent share of Egypt’s car market.
Euronews correspondent Mohammed Shaikhibrahim in Cairo concluded: “Egypt’s government is trying to find ways to rescue the economy, but so far it doesn’t appear to be enough or particularly effective. Economists now fear the government could allow the Egyptian pound to float, which they think would be economic suicide, especially in a country already experiencing low growth and high unemployment.”