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While Egypt may not go bankrupt, the population may have to suffer for a prolonged period of time as fears of social collapse mount.
Lama Samy, 24, still lives at home with her parents. She is a skilled media professional with relative market experience, but says she cannot afford to move out of her parents’ home due to dwindling wages and an increasingly unstable work environment. She claims that even though not having to pay rent has saved her a significant amount of money, the effects of the financial crisis in Egypt are now more severe than ever.
“Previously, 1000 EGP would go a long way, and it was enough to purchase a week’s worth of groceries, but now we spend the same amount to purchase little to nothing,” Samy told Fanack.
Egypt‘s local currency has lost almost half its value against the dollar in large part due to a $3 billion loan issued by the International Monetary Fund (IMF) to bail out the Egyptian economy.
The loan stipulates harsh requirements that must be met, despite the financial repercussions on the people. In the case of the Egyptian pound, the World Bank generally favors less government intervention in economic affairs, which means allowing the currency to fluctuate at the current market rate.
With more than 20 percent inflation, emptied-out grocery stores, and imported goods running out, Egyptians of all ages and social ranks – with the exception of the wealthy – are finding it difficult to cope. In the face of an uncertain future and a grim reality at hand, experts and observers believe that while the state may not go bankrupt, the population may have to suffer for a prolonged period of time as fears of social collapse mount.
“The people are angry and frustrated and it’s being made evident every day,” Samy said. “It is in our hopes that the situation will get better but we don’t think it will.”
Egypt is home to a population estimated at more than 106 million people, over half of whom are facing dire economic conditions. As the country grapples with one of the worst inflation rates in the last five years alone, it is becoming increasingly difficult for Egypt’s most vulnerable to put food on the table with poultry prices rising from 30 Egyptian pounds (then $1.9) per kilogram in 2021 to as much as 70 Egyptian pounds ($2.36), according to CNN.
Throughout the past decade, Egypt has suffered from numerous financial crises, causing it to seek bailouts from creditors including the IMF, and GCC allies. As reported by the IMF, the country’s debt this year accounts for 85.6% of the size of its economy. This has left the country in an unsustainable cycle of borrowing.
One of the key factors to the failing economy is the military’s outsized role that has weakened its private sector. The military’s expenditures range from stations to greenhouses, petrol, food, factories, hotels, transport, and more. Additionally, the government’s investments in mega projects such as a new capital city in the desert housing a defense ministry “bigger than the Pentagon,” has hindered private companies from competing and creating new employment opportunities.
The COVID-19 pandemic resulted in investors withdrawing $20 billion from the country in 2020, while the Ukraine War has increased fuel prices, pushing inflation higher.
The Egyptian government was therefore forced to turn to the IMF for the fourth time in six years in 2022. The state agreed to a flexible exchange rate during the agreement bailout in October, which led to an immediate drop of one-third of the currency’s value against the dollar that same month.
People paying the price
For writer Karim El-Gammal, 34, his salary once afforded him necessities as well as leisure activities and cultural events. Before the crisis, the Egyptian researcher enjoyed attending opera concerts, buying books in bulk, and traveling a few times a year.
“The change happened in a drastic way too quickly,” El-Gammal told Fanack. “What makes things worse is that we’re not a self-sufficient country which means that relying on imports keeps us in financial trouble.”
According to El-Gammal, salaries have remained the same without any increases, leaving the people in a state of constant loss as the currency continues its downward spiral.
A year ago, people who earned 4,000 GEP were able to maintain a decent standard of living for a small nuclear family. Today, a family of four requires around 10,000 GEP in order to meet its basic needs, he explained.
“Apart from food expenditures, people are spending money on extra classes for their children due to the poor quality of education in public schools,” El-Gammal said.
The World Bank estimates that roughly one third of Egypt’s 104 million inhabitants live below the poverty line, and an equal number are considered to be “vulnerable to falling into poverty.” The current financial crisis has also affected the traditional middle class, with many wage earners currently making approximately $135 per month, reaching out to charities for financial assistance.
“One man told us he can either feed his kids or put them through school, but not both,” Ahmed Hesham of the Abwab El-Kheir charity told Al-Monitor.
The most basic of essentials, such as milk, sugar, and rice, are only offered in limited quantities in many supermarkets with a one bag per person policy. Videos of concerned citizens lamenting and voicing their concerns have become all too common on social media platforms, with many expressing dissatisfaction, rage, grief, and concern for the present and the future.
Meats of all kinds, including beef, chicken and fish have become a luxury that people are rationing, El-Gammal explained, in addition to limiting food purchases throughout the month in order to stay financially afloat.
But the cost of preparing even the cheapest meals is rising. Koshary, for instance, one of Egypt’s most popular and cheapest dishes made up of pasta, rice, lentils, chickpeas, fried onions and tomato sauce, is increasingly becoming unaffordable to many.
Additionally, Samy and El-Gammal note that companies, unable to procure enough profits, have been laying off their employees, giving rise to an unemployment crisis that will particularly affect the newly graduated.
Samy claims that many young adults who relocated from remote towns to begin a career or pursue education in major cities like Cairo and Alexandria are now returning home and abandoning their education and employment due to an inability to pay rent and afford living expenses.
El-Gammal says that many young Egyptians are either thinking of or have begun the process of leaving the country in search of better employment opportunities abroad.
“Even the affluent complain, and no one is at ease. There is much uncertainty and concern surrounding the upcoming few years and the challenges they will bring,” he stated.
Different country, same crisis?
In a similar manner to Egypt, Lebanon‘s currency has also lost a 90% of its value reaching a staggering 60,000 L.L. to a dollar in the informal market at the time of writing, after it was a mere 1,500 L.L. in 2019.
On 1 February, the central bank announced the new official rate of 15,000 pounds per US dollar, replacing the previous rate of little over 1,500 pounds, which the currency had been pegged to for decades prior to the collapse.
The approval of the new official exchange rate has been described by Lebanese officials as a step toward unifying a variety of rates that have developed during the crisis, but many see it as mostly cosmetic since it will do little to control the adjacent black market.
Due to banks’ restricted access to dollars, significant black marketplaces for dollar transactions have emerged in both nations. Currently, 33 pounds may be purchased for one dollar on the black market rate in Egypt.
According to Egyptian economist Mona Chammakh, it is difficult to compare the two nations because of their dissimilar situations and coping mechanisms. Lebanon does not appear likely to sign a bailout plan with the IMF any time soon, despite the fact that both countries have been beset by shortages, currency crashes, and rising inflation rates.
According to Chammakh, “people must adjust to progressively harsher conditions, like they did in Lebanon,” she told Fanack. “I anticipate that consumers will gravitate to inexpensive goods and may even start growing their own food at home, keeping chickens, and making their own bread.”
Another significant distinction between the two nations is that while all earnings in Egypt are paid in Egyptian pounds, which lowers people’s purchasing power equally, 13.6% of Lebanese workers receive their pay in fresh dollars.
El-Gammal worries that the economy might be further damaged if tourism does not improve as a result of the worsening human rights abuses, adversely affecting the country’s international reputation.
In 2021, Egypt continued to escalate its use of the death penalty and executions following unfair trials and mass prosecutions, as reported by Human Rights Watch. According to the Egyptian Front for Human Rights, 80 people were executed in the first six months of 2021, about half of them allegedly for political reasons.
Samy and El-Gammal are not optimistic about the future due to the IMF’s proposal to sell state assets as one of the solutions for the crisis. El-Gammal contends that these types of policies are not sufficient in the long run and that the country must rely on its own production to achieve economic improvement.
Samy, on the other hand, notes that individuals are expressing consistent feelings of resentment and disdain toward the government online.
“It’s the revolution of the hungry where chaos ensues and security is no longer available that we fear most,” she said.