Egyptians move in an eternal journey of misery without sufficient information. Economics do not provide them with satisfactory answers regarding the soaring prices, and political talks do no good for them either.

The Central Bank of Egypt (CBE) announced on November 8 that the USD/L.E. exchange rate was 7.93, which meant that it might exceed 8 in banks. The rate is expected to reach 8.50 in the black market.

Egyptians move in an eternal journey of misery without sufficient information. Economics do not provide them with satisfactory answers regarding the soaring prices, and political talks do no good for them either.

The Central Bank of Egypt (CBE) announced on November 8 that the USD/L.E. exchange rate was 7.93, which meant that it might exceed 8 in banks. The rate is expected to reach 8.50 in the black market.

This ascending movement of the dollar is like a wave driving up prices along with it. All prices have increased, especially prices of the commodities that include imported materials. Food commodities, such as eggs and chickens, have been also affected because 90 percent of the materials from the poultry industry are imported, be them fodders or vaccines. Vegetables prices went up 19.95 percent last month.

These perishable products burn a hole in Egyptian pockets because the prices fluctuate frequently. The national average of annual household expenditures on fresh produce is over L.E. 26,000 (about US$ 2,400), according to the Central Agency for Public Mobilization and Statistics.

Muhammad Hegazi works in the sale of kits and supplies of metalworking and lives at the Ahram Gardens in Cairo. Hegazi says the price increase in Cairo compared to his hometown Manzala is illogical. This is why he buys vegetables, fruits and fish from Manzala which he visits every week.

Volatile fluctuations for perishables

Stacks of vegetable and fruits enter Cairo every day. If this process is stopped or delayed because of rain or bad weather, a further price increase occurs. This happens while the CBE, when estimating the core inflation, pays attention to neither these commodities nor Egyptians’ suffering. It also excludes all commodities whose prices increase drastically, as well as the services whose prices are determined by state-owned companies, such as electricity and water.

Hegazi, a father of three sons and a daughter in university, felt the country’s economic conditions were not reassuring. This is why he encouraged his eldest son, 23, to travel to Saudi Arabia to work as a driver and a seller of food. Hegazi’s other children study and also help him in his business.

Muhammad Sultan, an economic researcher, believes that the CBE’s monetary policies ignore all the economic conditions overburdening Egyptians. He says it is a science that knows no drama. “When calculating the core inflation, the CBE disregards all the most fluctuating commodities in order to make customized calculations,” says Sultan. “But how can we consider its calculations to be accurate while Egyptians spend most of their money on these commodities?”

Exchange rate

It is impossible to believe that the lives of more than 89 million Egyptians can be encompassed in CBE statistics or indicators. Everyone might suffer from inflation, but this suffering differs from one family to the next. Hence, the most telling indicator is the USD/L.E. exchange rate.

The CBE organizes three bids weekly to sell dollars to Egyptian banks. Since late October, it has regularly supplied US$40 million, keeping the USD/L.E. exchange rate stable at 7.39. This however has not prevented the rate from rising to 7.93 in early November. This increasing trend is expected to continue, especially since Tareq Amer, CBE’s new governor who will hold office late this month, announced that he would adhere to the same policy.

Before the 2011 revolution, Egypt’s reserves of dollars were 35 billion. Now, however, these reserves are decreasing; while they were 18.09 billion last August, they fell to 16.4 billion late October, even though that was 80 million higher than the previous month.

Funding the canal

“It all started with the Suez Canal investment certificates,” says Hegazi.

On September 4, 2014, the CBE announced selling out five-year investment certificates at an interest rate of 12% to finance a project to deepen the Suez Canal to 24 meters and open a new 34-kilometer bypass. For eight days, these certificates were heavily in demand by Egyptians, which led an estimated of L.E. 61 billion to go from their pockets to the state.

These funds, says Hegazi, “had been kept aside as the capital of potential small economic activities, but the result now is that the market is dead. Most recently, the president has asked traders to bring their goods out of warehouses in order for prices to fall, but this is impossible. No one is buying.”