The Ukraine war has exacted a heavy toll on Egypt’s troubled economy and the 104 million Egyptians who are struggling with the high cost of food, medicine and other essential imports.
The situation has compelled the government and the central bank to adopt unprecedented measures.
To boost the supply of foreign currency to buy essential imports and reduce inflation of 18 per cent, the country’s largest state-owned banks, The National Bank of Egypt and Banque Misr, have issued Egyptian pound savings certificates with interest rates of 25 per cent annually and 22.5 per cent monthly. These are the highest interest rates ever offered by Egyptian banks.
The objective is to create local demand for the Egyptian pound, which has lost 60 per cent of its value to the dollar since early 2022.
Instead of maintaining bank deposits in Egyptian pounds, Egyptians hoard or transfer abroad dollars and other hard currencies, starving the country of foreign exchange. Cabinet spokesman Nader Saad said goods worth $9.5 billion have remained in Egyptian ports until there is hard currency to pay for them.
After the Ukraine war erupted, foreign investors withdrew billions from Egypt while the tourism sector – which employs 10 per cent of 27 million workers and accounts for 20 per cent of GDP – lost Russian and Ukrainian tourists who made up about a quarter of total arrivals.
Egypt has been forced to pay more for essential imports of wheat and livestock feed formerly supplied by Russia and Ukraine as well as vegetables and raw materials for manufacturing goods for export. Although priority has been given to clearing food for people and livestock from the ports, prices have soared.
A 50 per cent rise in the price of formerly affordable chicken has prompted the governmental National Nutrition Institute to promote the consumption of chicken feet soup as a cheap source of protein. This has produced social media outrage which has been reported by local and foreign media.
Workers can no longer afford Koshari, a popular dish of lentils, chickpeas, pasta and spicy tomato sauce, the Washington Post reported.
Middle class families have relied on fava beans and lentils while the wealthy have lived lavishly and the government has carried on with construction of the new administrative capital 45 kilometres east of Cairo.
Although Egypt’s foreign currency reserves were dangerously depleted by the need to finance expensive imports, projects and interest on loans, the crisis has partially eased due to injections of cash by Saudi Arabia and the United Arab Emirates.
Egypt’s currency reserves stand at $34 billion. The International Monetary Fund has agreed to supply Egypt with an initial $3 billion loan and could add another $14 billion to stabilise the economy and provide for the third of Egyptians who are poverty-stricken.