Egypt’s soaring prices drive home economic pain By Reuters

By Mariam Rizk

CAIRO (Reuters) – In better times, Om Mohamed’s family used to take holidays at resorts on Egypt’s Red Sea coast.

Now there is no money for vacations. Om Mohamed, 61, and her husband, who live with two grown-up sons in an apartment near the Cairo ringroad, are cutting back on items like meat as they try to get by on his meagre pension from an energy company.

Over recent months accelerating inflation has pummelled the spending power of Egyptians, who had already endured repeated economic shocks and years of austerity.

Along with a currency crisis, it has exposed the vulnerability of an economy long propped up by international lenders and Gulf allies that see Egypt as a lynchpin of regional security.

The government says it is doing what it can to tamp down prices and expand social spending, often blaming current pressures on external factors linked to the war in Ukraine.

It also points to a state-led infrastructure boom that has given rise to new roads and cities and helped Egypt’s economy stay in growth through the coronavirus pandemic.

For Om Mohamed, that is little comfort. Her husband now rises early to queue for heavily subsidized bread. One of her daughters, who lives nearby, has been selling jewellery to pay for her young children’s schooling, after finding no state education options in the area.

“We don’t have a proper sewage system or clean water. Sometimes I open the tap and the water smells like sewage, and I cannot afford to buy bottled water every day,” Om Mohamed said during an interview at her apartment in a rubbish-strewn street on the northern outskirts of Cairo.

“There is no middle class anymore, only upper-class people are able to live right now,” she added.

DEVALUATIONS

The fallout from Russia’s invasion of Ukraine in February 2022 exacerbated Egypt’s foreign currency crunch, as foreign investors who were already cooling on the country rapidly withdrew more than $20 billion, a tourism recovery was cut short and the bill for key imports spiked.

The central bank allowed the first in a series of sharp devaluations and Egypt sought its latest round of support from oil-rich Gulf states and the International Monetary Fund.

The Egyptian pound has fallen by nearly 50% since last March and annual headline inflation has climbed above 20%, its highest for five years, though consumers note far steeper price increases for many goods, including basic food items that some shops have begun to ration.

While many countries are struggling to contain rampant inflation, Egypt, with a population of 104 million, is among the hardest hit.

GRAPHIC: Food and drinks drive soaring Egyptian inflation – https://www.reuters.com/graphics/EGYPT-ECONOMY/klvygzjzyvg/chart.png

About 30% of Egyptians were living in poverty as of 2020, according to…