Inflation makes the fuel and food invoices flare up, and the debt weighs heavily in the country’s economy
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Six years after having gone through an economic crisis which led her to devalue her national currency and contract a loan of $ 12 billion (12.34 billion euros) with the International Monetary Fund (IMF), L ‘Egypt is shaken by the shock waves of the war in Ukraine. The conflict accentuates the vulnerabilities of this emerging economy, already undermined by a wave of inflation in the wake of the Pandemic of Covid-19 and by a leak in foreign investments. In its economic perspectives published Tuesday, October 11, the IMF reduced its forecasts of economic growth for Egypt for 2023 to 4.4 %, against the 4.8 % which were scheduled for July.
Cairo suffers from a shortage of dollars which exerts pressure on the Egyptian pound and strongly slowed down imports, whose country of 104 million inhabitants is strongly dependent. Experts believe that the Egyptian book has lost, since the beginning of 2022, between 20 % and 25 % of its value against the greenback. The local currency has undergone slow depreciation since the end of March and the decision of the Central Bank of Egypt (ECB) to put an end to the fixed exchange rate system, which had led to a devaluation of more than 16 % of the Egyptian pound, parallel to the 1 % increase in its interest rates.
“The depreciation movement of the Egyptian pound has been initiated due to tension on liquidity in Egypt, because more than $ 20 billion in portfolio investments came out of the country,” said a foreign observer. While the foreign currency reserves were annoyed, the authorities of Cairo introduced, in March, restrictions on access to dollars for imports from the private sector, which cause shortages. Food and fuel bills have skyrocketed, with inflation close to its highest level in four years. Annual underlying inflation, an indicator used by the central bank which excludes volatile elements, accelerated at 18 % in September, against 16.7 % the previous month.
allies Arab
The oil powers of the Gulf came to the rescue of Egypt. Cairo has obtained commitments on more than $ 22 billion in deposits and investments from its Arab allies in the region. “The promises of the Gulf are slow to materialize, however, because they want to buy assets in Egypt and it takes time,” notes the foreign observer. The Minister of Finance, Mohamed Maait, said that a possible funding from Japan and China was also on the table.
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