The Egyptian Centre for Economic and Social Rights (ECESR) doubted the state’s ability to confront the consequences of the Central Bank of Egypt’s (CBE) decision on 3 November.
In a report released Monday, ECESR said that the decision to float the Egyptian pound, which was made as a precondition to the International Monetary Fund’s (IMF) three-year, $12bn loan, will increase poverty rates to the most unprecedented levels in Egypt’s history. The centre added that the government seems unconcerned with how the decision will change reality for low-income citizens.
Shortly after the CBE announced it would float the pound, the government announced that it would reduce subsidies on petroleum products, increasing prices for citizens from all socio-economic backgrounds. Both decisions have received criticism from citizens, economic experts, and politicians.
ECESR supported its doubts by explaining that the government has not taken any major actions to support activating certain much-needed social projects, such as developing medical insurance systems, reconstructing insurance services for citizens, and providing assistance for those who need it.
The centre also said: “The government didn’t address the implementation of measures that would raise people’s incomes, such as providing payroll tax cuts.” It went on to explain that it seems like the government is deliberately pushing the middle class into poverty.
Commenting on the government’s decisions to increase allocations for food subsidy cards from EGP 18 to EGP 21, the report explained that the decision is a very limited alternative and will not cause major improvement, as EGP 3 cannot cover the price increases resulting from inflation.
Suggestions that limiting imports can solve the currency problem will not benefit Egypt as some imported products are essential for the country’s production, the centre said.
Prices hikes will worsen the living standards of low-income citizens, and the middle class will disintegrate as it fails to maintain its previous standards of living, according to the report.
The IMF loan is supposed to help the state in the process of economic reform, though it has been rejected by economic experts and politicians who believe that the economic reforms tied to the loan are not suitable for Egypt’s already suffering citizens.
The ECESR was not the only entity which said the state may fail to handle the current situation; political parties and figures have previously pointed this out, explaining that from the beginning the government did not deal with the economic issue wisely.
The consequences of the pound’s flotation have already started to appear on the ground, such as further price hikes of several products with the exchange rate rising to EGP 17 to the US dollar.
The quality of life for low-income citizens will be seriously impacted despite a statement from the prime minister asserting that subsidies will continue—a claim which contradicts IMF terms.
Political parties and figures agreed that the only ones who will benefit from the IMF’s terms are business community and its projects, as they will not be affected by the price hikes as much as ordinary citizens. They also believe that if the situation is not resolved soon, another revolution will erupt and this time it will be the “revolution of the hungry”.
Egypt’s economy was severely impacted following the revolution in 2011, as foreign investors either halted their work in Egypt or decreased their investments. This was compounded by a decline in production which impacted imports and decreased exports. Egypt’s dollar resources were also impacted following the Russian aeroplane crash in October 2015, as many countries suspended direct flights to Egypt.