2024-02-01 11:46:37
Published on February 1, 2024
Lecture : 3 minutes.
Greenbacks are now almost impossible to find in Egypt. Those who manage to obtain them find them on the black market at an unprecedented rate: more than 70 Egyptian pounds to the dollar, compared to nearly 31 at the official rate posted by the banks which, most of the time, refuse to sell dollars to their customers. Investors “who depend on dollar supplies […] will not be able to continue, ”warns economist Mohammed Fouad. The Kuwaitian group Alshaya was the first: it announced that it was reducing the number of its brands in Egypt, where it notably owns Starbucks, The Body Shop and Debenhams.
Individuals, too, are blocked. Payment limits in dollars have continued to be reduced: less than 100 dollars is today the maximum amount of cash that an Egyptian can withdraw abroad. Or the maximum he can pay online abroad with an account in a banque Egyptian. The only way to travel is therefore either to buy your ticket online in local currency via the national airline, or to buy it in cash from a travel agency. For those who do not have a credit card – but only a debit card – any online payment abroad is prohibited, even a Netflix subscription which is at a reduced price in Egypt: less than three dollars.
An increasingly critical situation
In and country where almost everything is imported, buying a car, for example, is out of reach for the middle class. In 2022, at the start of the devaluation, Egyptians were already buying ten times fewer cars than the French – whose population is only two thirds of that of Egypt. If two thirds of the 106 million inhabitants are poor or on the poverty line, inflation at 35% and devaluation also affect until highest level of state.
Foreign debt exploded to $164.7 billion. Its 2024 service alone amounts to $42 billion and Egypt is now the second country most at risk of defaulting on its debt, just behind war-torn Ukraine. JP Morgan will remove Egypt from its emerging markets government bond index on January 31, notably for “difficulties in terms of foreign currency liquidity reported by of the investors”.
The Moody’s agency now judges the outlook for the Egyptian economy to be “negative”, between “currency shortages”, “weakened consumer confidence” and “borrowers less and less able to repay their loans”. Egyptian President Abdel Fattah al-Sissi recently explained in a speech that the state spends three billion dollars a month on basic products such as food and energy. “We provide services to the Egyptian people in Egyptian books and [nous] must payer in dollars, “he said.
Solutions to find
For James Swanston, analyst at Capital Economics, the situation will get worse if Egypt does not adopt “a fully floating exchange rate coupled with strict control of financial policy.” Without this, the country will be “even more at risk of defaulting on its debt”. James Swanston imagines two stages. First, what all Egyptians fear: a new devaluation to 40 pounds to the dollar. Then, “the adoption of a rate of Change floating ” – What Cairo has promised to the International Monetary Fund (IMF) for years.
But, Mohammed Fouad nuance, “in the immediate future, the State has an interest in stability because it is the largest debtor in dollars and would therefore be the most affected by an increase in the price” of the greenback. “In the short term, I am sure that Egypt will repay its debts, but if the current situation persists, with increasing debt and growth economic Unable to compensate, so we will have to worry, ”continues this former deputy.
For experts, the reasons for concern are mounting: foreign exchange earnings from tourism have been declining for years and attacks by Yemen’s Houthi rebels in the Red Sea and the Gulf of Aden are now driving revenues down dollars from the Suez Canal. Worse still, the money shipments of Egyptian workers abroad – double these two sectors combined – fell by around 30% in the first quarter of 2023-2024.
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For James Swanston, a new IMF loan is needed to “reassure investors, revive the Egyptian bond market and help reduce interest rates on the debt”. And this “seems more and more likely” now that the IMF has finally sent a delegation for the first evaluations of the three billion dollar loan granted at the end of 2022, according to the media Egyptians.
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