Devaluation woes

Amira Hisham, Tuesday 12 Mar 2024

Al-Ahram Weekly gauges people’s concerns following the liberalisation of the exchange rate.



Samia, a housewife with three children, does not understand what a devaluation is. What she does know, however, is that prices go up every time the state devalues the national currency. The Central Bank of Egypt (CBE) on 6 March allowed market forces to determine the exchange rate. The value of the pound fell from LE31 per dollar to almost LE50.

For the time being, Samia told Al-Ahram Weekly, she finds solace in the fact she bought 10 kg of rice for LE27 a kg, down from LE40. In addition, she bought chicken, the prices of which had dropped from LE220 to LE180, and cooking oil for LE60 a litre. Prices fell briefly following the Ras Al-Hekma deal Egypt signed with the UAE by virtue of which it received an initial $10 billion in investment. News of the influx of funds cooled the value of the dollar on the parallel market and traders accordingly repriced their goods. When the official dollar rate rose, they priced their goods upwards once again.

Nevertheless, Samia expressed concern about the price of milk which has gone up by 75 per cent. She’s also worried about the cost of the next bag of rice she will buy following the announcement of the exchange rate liberalisation.

Samia’s worries persist despite announcements that the state had issued a host of directives to tighten control over the prices of strategic foodstuffs and a few days before the beginning of the holy month of Ramadan when demand on various food commodities is at its highest. 

Nadia, wife of a porter, with two children and in her 30s, does not know much about devaluation and its impact either. However, she has been keeping an eye on the cost of chicken. Her dreams of buying more chicken for her family were dashed after she had noticed its price had gone up following an initial price decrease.

Fayza Eid, a 61-year-old worker with a monthly income of LE1,500, observed a drop in prices for two days before their resurgence. She learned the price spike was caused by devaluation when she found out the chicken fillet price exceeded LE200 a kg. 

Eid had to change her plans for the first meal of Ramadan, concerned about how she will navigate through the month with the ongoing increase in prices. Mothers and housewives try to ensure a hearty meal every day for their families to break their fast on.

With the advent of Ramadan, the government made available various food commodities at co-ops, launching price reduction initiatives such as We Are All One.

Hisham Al-Omda, an eggs and frozen meat vendor, said this was not the best time to devalue the pound, suggesting it would have been better to put it off. The Ras Al-Hekma announcement caused an instant shift in the market, leading to a substantial drop in prices, with the cost of a kg of imported meat decreasing by LE80 at once, Al-Omda said. Delaying the decision to liberalise the pound would have allowed prices to cool down. Only then would the devaluation announcement have been appropriate, Al-Omda noted.

However, the decision to devalue the pound encouraged traders to throw caution to the wind and raise commodity prices.

A supermarket manager said that before Ramadan, food companies made offers of reduced prices but that these were likely to end after the holy month.

Meanwhile, as people closely monitor the price of food commodities, especially with the onset of Ramadan, Sayed, a taxi driver, grapples with the challenges posed by the soaring costs of maintaining his car. The decision to devalue the pound further heightened his worries.

Although fuel prices increased a few months ago, taxi fares have not been adjusted, he said, indicating his income has not increased amid the price rise of food staples, including cheese, bread, and eggs.

“The income from my work is not enough to cover the maintenance costs of my car and also falls short of meeting my daily needs, especially with the constant surge in prices,” Sayed said.

* A version of this article appears in print in the 14 March, 2024 edition of Al-Ahram Weekly

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