In 2023, the Muslim month of Ramadan will not start until the end of March. But, on a plot of land on King Faisal street in the Egyptian city of Giza, barely five kilometers from the pyramids, a large tent typical of this period of the year has already been installed. The entrance is presided over by a portrait of the omnipresent president of the country, Abdelfatá al Sisi and inside there are several dozen stands with food and other basic products at attractive prices: sweets, tea, meat, oil, vegetables, fish, legumes, frozen foods or spices.
Some 150 similar tents have been erected across Egypt since early January at the initiative of the government. Not so much to show early enthusiasm for the holidays, but to take the pressure off runaway prices on the vast majority of homes. In fact, a second poster at the entrance to the fair reveals its true raison d’être: “Presidential initiative to fight against high prices”.
“90% of the people who come buy little by little, for the month and for Ramadan,” explains Haisam, an employee of a Cairo publishing house who waits for his family in front of Faisal’s tent with several bottles of oil. “Here the prices are reasonable,” he considers. In the last year, Egyptians have watched helplessly as their purchasing power has been seriously diminished: inflation has reached its highest rate in the last five years (21.3% year-on-year in December), the local currency has lost close to 100% of value and the lack of dollars has forced to limit all imports to the country. Next week a new government initiative is expected to start to allow anyone to buy subsidized bread.
In December, inflation in Egypt climbed to 21.3% year-on-year
The economic shock caused by the war -nearly 85% of wheat imports came from Russia and Ukraine before the war-, added to two years of turmoil associated with the covid-19 pandemic, has caused the airs the development and growth model pursued by the Egyptian authorities in recent years. This was mainly based on the accumulation of debt and a very high investment in large infrastructures, such as a new capital, still to be finished and with an uncertain economic return.
A massive capital flight, a stifling interest payment schedule and a sharp increase in the import bill, especially for basic products such as wheat, have exposed the fragile fundamentals of its economy and have placed the country facing the abyss.
In December, inflation in this country of 109 million inhabitants was driven by the sharp rise in food prices, which reached 37.2% despite the fact that the price index of the UN Food Agency and Agriculture (FAO) has already chained nine months of decline and is below the prices registered a year ago.
85% of households have reduced the consumption of meat, 75% that of chicken and eggs, 61% that of fish and almost the same percentage that of milk
“I’m an office worker and I have a fixed salary, but prices keep going up,” laments Haisam, who prefers not to give his last name.
Poorer, more desperate
The consequences for the vast majority of Egyptians have been dizzying. A November report by the state statistics agency (CAPMAS) revealed that, for example, since the start of the war in Ukraine, 74% of families in the country have cut back on food spending and stopped buying items like meat. A third also stated that they had not been able to cover their basic needs in the previous month. Another survey carried out between October and November of more than 6,000 poor or near-poor households in the country by the International Food Policy Research Institute (IFPRI) revealed that 85% of households reduced meat consumption, 75%, that of chicken and eggs, 61%, that of fish and almost the same percentage that of milk.
“There are many people who say they have had budget difficulties and have had to change their spending habits,” says Sikandra Kurdi, an IFPRI researcher and one of the report’s authors.
The positive part collected by the IFPRI study is that the consumption of food subsidized by the State, such as bread, sugar, oil and pasta, has hardly varied among the households surveyed, which suggests that the existing protection network, for However limited it may be, it is working and offering some support to the most vulnerable families. 70% of Egyptians have ration cards that allow them to buy food and basic household products and a higher proportion have access to subsidized bread. In addition, there are two other cash transfer programs that reach more than four million families.
Kurdi warns, however, that, although these aids are providing significant protection, such a marked change in diet as the one registered would have long-term consequences. Because, although basic needs can be covered with subsidized basic foods in Egypt, the “problem is that you also need proteins, fats and micronutrients, vitamins basically,” says the expert.
Egyptians are the first nationality to arrive in Italy by sea, with an increase of more than 200% compared to last year
In the last year, the Government has approved measures to alleviate the economic difficulties, such as raising the minimum wage for civil servants to 3,000 pounds a month (93 euros), although in the private sector it is still set at 2,400 pounds (€74) and often not even fulfilled. Social protection programs have also been expanded, pensions and tax breaks have risen, and electricity prices have been frozen.
But inflation has caused a sharp drop in the real value of salaries, pensions and subsidies in a context that was already delicate. The last poverty rate that was made public in the country, three years ago, was 29.7%. But Egypt sets the threshold at £10,300 a year (about €320 at current exchange rates) while the World Bank puts it at €744, a limit that, if applied, would cause the country’s poverty rate to skyrocket.
Under these circumstances, since the beginning of 2022, Egyptians have become the first nationality of migrants arriving in Italy by sea after crossing the dangerous central Mediterranean route, with an increase of more than 200% compared to the previous year.
The middle class pays the price
The IFPRI report also shows that 84% of the families surveyed have had to stop paying debts and a considerable percentage affirm that they have had to reduce spending on health (43%) and education (25%). These are data that show that the country’s middle class is especially affected by this hostile economic context.
Most Egyptians do not make £3,000 a month. The dollar has fallen by half, but prices have tripled.
Neighbor of the El-Gamaleya neighborhood
“They are the ones that pay the most taxes, and without any social security in return. They have to pay exorbitant amounts for education and health, which are basic necessities, while their salaries can barely cover daily needs,” says Jouna El Habbal, a political analyst who has devoted part of her research to this socioeconomic stratum in Egypt. “It’s a one-way relationship,” she says.
A resident of the neighborhood where the tourist Khan El Jalili bazaar is located in Cairo, who prefers to remain anonymous, explains that in the last year he has had to combine three jobs to make ends meet. And he regrets that the money he used to spend on food, rent, the electricity bill and school fees for his two children is now spent only on food and he can’t even buy the same things as before.
“Who can live like this? Most Egyptians don’t even earn £3,000 [93€] I’m lucky. How do they do it?”, she laments herself.
In Egypt, everyone has dropped at least one social stratum
Jouna El Habbal, political analyst
One of the few signs that reflects these difficulties is that, in the third quarter of 2022 – the last for which figures are available from the Financial Regulation Authority – consumer loans increased by 60% year-on-year.
The previous interviewee recounts that before the current crisis broke out, he participated in an informal rotating savings and credit association. A very popular model in Egypt whereby a group of people come together to save and lend money together without the intermediation of a bank. In his case, the amount was 80,000 pounds (about €2,500), with which he hoped to buy a car or pay the first installment on a flat. But, by the time it was his turn to receive the money, his value had dropped drastically. “Now I’ve forgotten everything [lo que quería comprar]”, he points out.
For El Habbal, the magnitude of the ongoing crisis is difficult to estimate. “It’s pretty safe to say that everyone has dropped at least one social stratum,” he reckons. “[La crisis actual] it has made it impossible for anyone to maintain their status”, sums up the political analyst.
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