In the past week President Abdel-Fattah Al-Sisi repeatedly underlined that the economic crisis triggered by the Russia-Ukraine war is negatively impacting all countries, and the best way to deal with the crisis is to remain clam.
“As a state, we are well aware of the scope of the current crisis,” he said. “We are not to blame for the Russia-Ukraine conflict or the coronavirus pandemic. We are paying the price for events outside our control.
“While everyone has the right to discuss possible solutions, the problem is that many speak without knowledge, and this random talk could feed confusion and panic among people.”
The president pleaded for an end to such “nonsense talk”. He urged the public to listen to the government which “is in possession of all the facts and figures”.
“For people to feel panic and fear is in the interest of no one. We cannot let Egypt down or abandon our country’s future. The best thing to do now is to double down and double production. I am sure that in 2023 we all will be able to absorb all the shocks that come our way and tackle all the challenges.”
Al-Sisi’s remarks came during Monday’s opening of the first conference of the National Alliance for Civil Development Work. He urged civil society organisations to multiply their efforts to contain the fallout of the economic crisis triggered by the war in Ukraine.
“The spillovers of the crisis will linger into 2023,” he warned. “I therefore call on the government and civil society organisations to double their efforts to meet the people’s needs and help the most vulnerable classes bear increases in the cost of living.”
In his address to the congregation at Christmas mass at the Cathedral of the Nativity of Christ in the New Administrative Capital on 7 January, President Al-Sisi sounded a similar note.
“Do not worry,” he urged. “Do not listen to rumours or irresponsible talk.
“The state is working in the interest of all Egyptians, and it is not hiding any facts. While the global crisis has had a huge economic impact and will continue to do so as long as the war continues, we are moving in the right direction. I call on all Egyptians not to worry or be afraid.”
Egypt is feeling the pinch of the war in Ukraine with rising inflation and a shortage of the foreign exchange necessary to import essential goods and commodities. This week the government announced a package of austerity measures which cut the 2022-23 budget in an attempt to conserve foreign exchange.
State institutions and national economic authorities are now obliged to seek Finance Ministry approval and coordinate with the Central Bank of Egypt (CBE) ahead of spending on any project or activity requiring foreign currency.
According to the Official Gazette, the prime ministerial decree states that new projects that require foreign exchange spending, and those for which construction has yet to begin, will be delayed, while “official spending on foreign travel will be allowed only on the prime minister’s approval”.
The move is intended to help bridge a $17 billion financing gap over the next four years as per the estimates of the International Monetary Fund (IMF) on Tuesday. The IMF had previously estimated the financing gap at $16 billion.
Egypt concluded a 46-month arrangement with the IMF under the Extended Fund Facility last month and has already received $347 million of a total $3 billion loan to help bridge the financing gap.
IMF funding is expected to catalyse additional finance from neighbouring countries. To secure the funding Egypt pledged to allow the Egyptian pound to trade freely, to cut public expenditures and allow a greater role for the private sector.
“These reforms will not be easy,” Ivanna Hollar, IMF mission chief for Egypt, Middle East and Central Asia, said during a press conference on Tuesday. “The proposed structural reforms will take time to implement and deliver the intended results of reducing vulnerabilities to shocks and bringing about a stronger growth outlook.”
MP Olfat Al-Mezlawi, a member of parliament’s Economic Committee, told Al-Ahram Weekly that “rising inflation has made life difficult for millions of low and average-income Egyptians”.
“While the war in Ukraine is to blame for these difficult economic conditions, some responsibility falls on the government’s failure to control retail markets which has left citizens prey to black marketeers and greedy traders,” she said.
Figures released by the Central Agency for Public Mobilisation and Statistics (CAPMAS) on Tuesday show that inflation hit 21.9 per cent in December 2022, up from 19.2 per cent a month earlier and 6.5 per cent in December 2021. CAPMAS attributes the monthly rise to increases in the price of basic commodities.
“Food and beverages rose by four per cent, fruit groups by 7.6 per cent, dairy products by 6.4 per cent, sugar by 2.5 per cent, grains and bread by five per cent, meat and poultry by 2.8 per cent, and fish and seafood by 3.1 per cent,” said CAMPAS.
Al-Mezlawi said that while the newly introduced record high-yield 25 per cent deposit certificates from the National Bank of Egypt and Banque Misr had been welcomed by the public, their impact is unlikely to stop the pound’s slide against the dollar.
The pound fell to a new low last week. On Tuesday, the official exchange of the pound was LE27.55 against the dollar, compared to LE24.7 on 3 January.
Economist Gouda Abdel-Khalek, a former minister of supply and internal trade, warns the government’s announced austerity measures may not be enough to solve the foreign exchange crunch.
“The measures show that the foreign exchange crisis runs deep and is likely to keep Egypt in its grip for some time. Inflation will continue to rise in the absence of government action to set spending priorities, particularly when it comes to mega-national projects, and curb imports,” he said.
* A version of this article appears in print in the 12 January, 2023 edition of Al-Ahram Weekly