11.05.2016.Egypt’s all-out uprising within 3 to 6 months.

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Egypt’s recent austerity measures are ‘an economic war on the poor’: ECESR

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Egypt’s reform measures turn into ‘economic war on poor’ – Rights group

Monday 07-11-2016 06:52 PM

  • Egypt's reform measures turn into 'economic war on poor' - Rights group

Reuters

CAIRO, Nov 7 (Aswat Masriya) – The absence of serious precautionary measures has turned the recent economic reform decisions into an “economic war" on poor citizens, a statement issued on Monday by the Egyptian Center for Economic and Social Rights (ECESR) read.

Egypt’s central bank announced on Thursday the floatation of the Egyptian pound before the government decided to raise energy prices by 30-47 per cent in a bid to meet the criteria for a $12 billion loan from the International Monetary Fund.

“Authorities in Egypt and financial institutions dealt with the crisis in a way that didn’t take the ordinary citizens, who will face great pressure as a result of these policies, into consideration," the statement read.

The ECESR statement also addressed the consequences of the measures saying that the government “didn’t announce any social protection alternatives except decisions with “limited effect".

The government decreased the age of those receiving the pension benefits from 65 to 60 years. It also announced increasing the amount allocated to individuals holding food subsidy cards from EGP 18 to EGP 21 starting next month in an attempt to compensate for price hikes.

Only two days after the government abandoned its US dollar peg, Egyptian pound dropped to almost 17 to dollar.

The statement also discussed fears of high inflation saying that the most optimistic forecasts expect a 20 per cent inflation rate by the end of the year, with expectations to reach 30 per cent by mid next year.

Last week’s decisions came in the context of the government’s economic reform program that aims to reduce the budget deficit and the public debt.

It happened few days after the black market rate for dollars surged to unprecedented highs reaching roughly EGP 18.25, when the official rate was maintained at EGP 8.8.

The statement said the widening gap between the black market and the official rate was a reflection of the government’s “deteriorating economic performance" saying there’s no sign of a new vision to improve this performance.

Several pundits and experts have suggested that limiting imports would help solve the currency problem. The center however said this policy would be ineffective as imports “don’t count as a luxury to Egypt’s economy but a necessity" with 74 per cent of the import activities focusing on production inputs as fuel and raw material.

“November 3 decisions could raise poverty rates to unprecedented levels in Egypt’s history as the government didn’t address the implementation of measures that would raise incomes, like providing payroll tax cuts, as if it’s deliberately pushing the middle class into poverty," the statement added.

Over 27 per cent of Egypt’s population live below the poverty line, which stand at EGP 5787.9 annually and 482 monthly, according to a report issued by the Central Agency for Public Mobilisation and Statistics in October.

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News Analysis: Egypt’s currency devaluation step in right direction: economists

Source: Xinhua

2016-11-04 02:11:44

             

by Mahmoud Fouly

CAIRO, Nov. 3 (Xinhua) — The devaluation of the Egyptian pound is a step in the right direction to limit the hike and shortage of the U.S. dollar, boost foreign investments and meet a key demand of the International Monetary Fund (IMF) to provide a 12-billion-dollar loan to the Arab country, said Egyptian financial and economic experts.

The Central Bank of Egypt (CBE) announced on Thursday devaluation of the local currency by 48 percent which would allow the pound to float in the financial market based on offer and demand for the dollar.

INVESTMENT PUSH

“The decision is 100 percent right. It is the first decision to be decisively made to treat a defective monetary policy among other complementary decisions to fix the financial market," said Mohamed Farid, former EGX vice-chairman and head of Dcode Economic and Financial Consulting Company.

Recession over the past five years of political turmoil hit the country’s main foreign currency resources including tourism, foreign investments and exports, which led to a huge hike in dollar price and a wide gap between its official and black market exchange rates, affecting many import-based businesses.

“Today’s move puts an end to the black market as it makes dollars available in the banks with a competitive price, which is expected to refresh the import-based industries and businesses and attract foreign investments into the country," Farid told Xinhua.

He continued that the devaluation makes the currency a tool not a goal and it will help boost economy by urging closed or reduced businesses to reopen or increase production.

“It will also make foreign investors think purely about investment chances rather than how to get in and out Egypt amid two currency markets," the financial expert explained.

After raising the official exchange rate of the dollar from 8.8 pounds to over 13 pounds, subjecting the dollar price to offer and demand mechanisms is expected to make investors confident while planning to invest in Egypt without worrying about their funds.

“This will surely have a positive effect on investment as well as the stock exchange market in Egypt, because foreign investors will be encouraged by the liberty to enter the Egyptian market with an actual rate for the foreign currency," said Mohamed Youssef, Director of Egyptian Businessmen Association.

Youssef urged a series of other measures to improve investment climate including structural reforms such as amendments in the investment-related legislations, issuance of the new anti-bureaucracy investment law and offering more foreign investment incentives.

IMF DEMAND

Egypt has been struggling to survive severe economic recession that led to a decline in foreign currency reserves, a growing budget deficit to reach 339.5 billion Egyptian pounds (about 24.6 billion U.S. dollars according to new rates), which represents 12.2 percent of the gross domestic product, and rising foreign debts to recently reach 55.8 billion dollars.

The situation led the country to resort to a 12 billion dollar loan from the International Monetary Fund (IMF) whose initial agreement has been reached in August, and it is expected to be accompanied by some economic reforms including fuel and energy subsidy cuts.

“We have communicated with the IMF and we received positive reactions to our economic measures," said CBE Governor Tarek Amer in a press conference Thursday, stressing Egypt consulted the world financial institution “to put the Egyptian economy on the path of confidence."

Meanwhile, the IMF welcomed in a statement the CBE’s decision to float the Egyptian pound and said it would “boost competitiveness and attract foreign investment."

“We welcome the Central Bank of Egypt’s decision to liberalize the foreign exchange system and adopt a flexible rate regime," said Chris Jarvis, chief of IMF mission for Egypt, in the statement.

Samir Radwan, Egyptian former finance minister, said that the pound floatation move is “an expected important move that should have been made earlier," stressing it must be followed by other measures to ensure sufficient dollar reserves and prevent the dollar exchange rate from soaring once again.

“The IMF deal should be urgently finalized and Egypt should get four billion dollars as the first patch of the loan as soon as possible to maintain steadiness of the currency exchange rate," Radwan told Xinhua.

Radwan argued that the Egyptian economy suffered “a heart attack" for five years and it needs to be refreshed through increasing local production and encouraging dollar resources including tourism, the Suez Canal revenues and the remittances of Egyptian expatriates.

Editor: An

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Egypt in urgent need to push economic reform

Source: Xinhua

2016-11-04 21:00:29

             

CAIRO, Nov. 4 (Xinhua) — Egypt‘s Prime Minister Sherif Ismail said Friday that the state “no longer has the luxury" of being able to postponing urgent economic reforms, a day after the central bank floated the Egyptian pound and the government raised fuel prices.

“Lifting the subsidies was planned over five years, but we have to move forward to improve the economy by taking serious decisions and not only depending on analgesics," Ismail said at a press conference held on the weekend with the cabinet’s economic group ministers.

On Thursday, the Central Bank floated its currency to address a dollar crunch that has threatened to bring some imports to a halt, and to make a final push to secure a 12 billion U.S. dollar International Monetary Fund loan within days.

The bank in a statement said the decision of floating is part of an economic reform program to curb the budget deficit, push local production, boost foreign investments and save funds to improve healthcare and education services.

The Petroleum Ministry also raised the prices of the subsidized fuel by 30-50 percent, being effective on Friday.

Long queues of cars, motorbikes and minibuses lined up in petrol stations across Egypt early Friday to fill up their tanks before the new prices becomes effective.

Describing the decisions as “historic," Egypt’s premier said that the government aims to cut a subsidy bill that currently totals 201 billion Egyptian pounds (14.67 billion U.S. dollars) a year to free up cash for other spending.

“The majority of the budget was spent on the subsidies, leaving only 200 billion pounds (14.59 billion dollars) for health, education and other services," Ismail added.

“The public debt has nearly doubled, so we couldn’t wait any more," he said, defending Thursday’s decisions as “decisions of our fate."

The economic program aims to decrease the budget deficit, which currently stands at 12.2 percent of the GDP, to less than 10 percent, he added.

He pointed out that the program will aim also to increase the taxes and reduce the state subsidies.

Meanwhile, Finance Minister Amr El-Gharhy said on Friday that having two exchange rates on the official and the black markets had hindered direct investment in the country that suffered an ailing economy as Egypt saw two uprisings and topple of two president since 2011.

“Raising the prices of subsidized energy would decrease pressure on the state budget," Gharhy said.

Floating the pound is necessary for Egypt to not be reliant on aid, he added.

To protect the poor from the rise in prices, subsidies bill for basic commodity will raise to 49 billion pounds (3.57 billion dollars) from 44 billion pounds (3.21 billion dollars) after a recent decision to increase subsidies for individuals from 18 (1.3 pounds) to 21 pounds (1.53 dollars), the finance minister said.

Floating the pound had long been among a list of measures demanded by investors and international creditors, but had been avoided in the fear that rising prices could provoke popular anger from the poor class.

Egypt’s Oil Minister Tariq al-Molla said on Friday that the fuel price hikes will save 22 billion Egyptian pounds (1.60 billion dollars.)

“Egypt currently imports one third of petroleum product needs," al-Molla added. He expected Egypt will reach gas self sufficiency by 2020 due to recent discoveries.

Egypt’s pound plunged in value on Thursday, with the dollar trading on official markets at between 13.5 and 16 Egyptian pounds, up sharply from the previous rate of 8.8.

Egypt’s stock market on Thursday gained 11 billion pounds (80 million dollars.)

The Central Bank’s governor said the bank targets to increase the cash reserve from 19.59 billion dollars to 25 billion dollars by the end of 2016.

The head of the IMF commission to Egypt said the flexible currency rate system that has declared by the Central Bank will help improve Egypt’s competitiveness in the world markets and will also boost the exports and tourism, and lure foreign investments.

Editor: xuxin

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ANALYSIS: Egypt Could Be Heading For New Uprising After Series Of Economic Disasters

President el-Sisi has tried to calm the situation, but it may be too late.

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Barely a week ago Egypt was suffering from a severe shortage of sugar, and today even clean water running from the taps isn’t a given in the country of 94 million after the Nile, which is the main source of drinking water, turned brown.

This perhaps reminds you of one of the plagues that hit Egypt prior to the Exodus of the Israelites, when the Nile colored red.

Indeed, when one takes a closer look at the situation in contemporary Egypt, similarities are seen with the period of the 10 plagues.

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The economic situation in the largest Arab country is rapidly deteriorating and could spark a new popular uprising, this time directed at the regime of President Abdel Fattah el-Sisi.

Social justice was one of the key demands during the revolt that toppled former President Hosni Mubarak; today it’s the supply of people’s basic needs.

Soaring prices of state-subsidized food have prevented millions of Egyptians from buying meat, rice and other basic items.

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“We cannot find sugar, rice and many other items. And when we find them, we cannot afford the prices. So we don’t buy as much as we used to do,” Ahmad Soliman, a 31-year-old shoemaker, told The Washington Post last month.

In August alone electricity prices rose 25 to 40 percent while at the same time the government started to phase in a 13 percent value-added tax approved by parliament earlier that month.

Core inflation is 14.4 percent and continues to rise while custom duties also skyrocketed recently, making life even more difficult in a country that lives on imports and where half of the population is living on $2 a day.

Egypt’s economy is slated to grow 3.5 percent this year, missing the target of 5 percent, but much will depend on the return of tourists who stopped traveling to the country after the Islamic State shot down a Russian civilian airplane in the Sinai Peninsula in October 2015.

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The country has a budget deficit of 10 percent of national output and an enormous shortage of foreign currency. The jobless rate officially stands at 13 percent, but it is probably much higher.

In September, Egypt had only $19.6 billion in foreign reserves. Meanwhile, the Egyptian pound is in a free-fall against the dollar, with the exchange rate exceeding 18 pounds now on the black market while the official rate is 8.88 pounds to the greenback.

Israeli tourists returning from Sinai told Western Journalism last week that tourist-oriented businesses in the Peninsula only accept dollars as payment now.

They reported that due to the crisis scores of luxury hotels closed their doors, including hotels that had just recently opened.

The dire economic situation and lack of prospects for improvement forced el-Sisi to seek a $12 billion bailout from the International Monetary Fund, but chances are high the loan program will trigger the expected popular uprising because of the strict austerity measures.

To make things worse, Saudi Arabia stopped pumping money into Egypt’s defunct economy.

The kingdom has given Egypt at least $25 billion since el-Sisi took over Egypt in 2014.

But after Egypt sided with Syrian dictator Bashar al-Assad during a U.N. vote on a Russian resolution for Syria, things began to deteriorate in the relationship with Saudi leaders as well.

“Shortly after the vote, the Saudi ambassador to Egypt left Cairo for an unscheduled three-day visit to Riyadh. The state-owned Saudi oil company, Aramco, postponed a promised shipment of 700,000 tons of discounted oil in October, and the spokesman for Egypt’s oil ministry said the fate of November’s shipment remains unknown,” The New York Times reported Tuesday.

A joke about President el-Sisi by a high-ranking Saudi official led to more friction between the two countries last week.

Iyad Ameen Madani, who headed the Organization of Islamic Cooperation, garbled the name of the Tunisian president, Béji Caïd Essebsi, calling him “Béji Caïd el-Sisi.”

It was clear he was taking a swipe at the Egyptian president when he told Essebsi, “I am sure your fridge has more than water.”

This was a reference to el-Sisi’s remarks during a meeting with Egyptian youths that he had lived for a decade with only water in his refrigerator and had not complained.

The joke wasn’t well received in Egypt and caused an uproar on social media, where many people called for restoration of Egyptian pride vis-à-vis Saudi Arabia.

But now even clean drinking water has become unavailable to the disgruntled Egyptian masses and could spark the explosion that many fear.

After an Egyptian man who protested the high prices and the soaring inflation set himself on fire in front of an army base in Sidi Gaber, east of Alexandria, people started to organize on Facebook just like they did before the 2011 uprising.

The grassroots movement calls for the same sorts of protests that toppled Mubarak and brought the Muslim Brotherhood to power briefly.

The protesters choose Nov. 11 (11/11) as the day of nationwide protests. Police have already detained 70 people for “inciting protests,” while in Port Said residents took to the streets over high housing costs.

President el-Sisi, meanwhile, has tried to calm the situation, saying the recent measures were inevitable to save the economy.

“We are in the bottleneck and we are on our way out, but if we want to get out, we have to take tough decisions, tolerate these decisions, be patient, and the results will be great for the upcoming days and the upcoming generations,” he said last week.

It seems too late, however, if a cartoon that was doing the rounds on social media is indicative of the mood in Egypt it doesn’t bode well for the Egyptian president.

“The cartoon shows a drowning Egyptian, only his hand protruding from the depths, waving for help. The next strips show President Abdel Fattah al-Sisi diving in, taking the drowning man’s watch and turning away,” The Jerusalem Post reported.

What do you think? Scroll down to comment below.

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Economic reforms will ignite uprising of the poor: political parties, figures

State decision to float Egyptian pound sparks criticism from political parties and rights groups

 

“If the country’s economic conditions do not improve within three to six months at least, we will end up with a revolution of the hungry,” professor of political science Hassan Nafaa told Daily News Egypt in a phone interview.

Nafaa explained that the implementation of the International Monetary Fund’s (IMF) terms will have a serious impact on the state, especially as not all of these terms were studied or decided on by Egyptian experts who understand the conditions of the state. These were imposed by the IMF, which is an organisation that supports free trade that supports businessmen and threatens low-income citizens, said Nafaa.

The reaction to the Central Bank of Egypt’s (CBE) decision to float the Egyptian pound on 3 November has been negative. The decision came as part of the implementation of certain terms decided upon by the IMF to provide Egypt with $12bn to help the state in the process of economic reform. For a long time, Egypt has sought after an IMF loan, but was unwilling to succumb to certain terms.

This decision will increase prices in the country across the board, amid months of price hikes following the appreciation of the US dollar exchange rate and the activation of the value-added tax (VAT)—another IMF condition for the loan.

Political parties, politicians, and rights groups have condemned the government for floating the Egyptian pound, believing that low-income citizens are the only ones who will suffer the dire consequences of this decision.

Some political parties released statements, including the Bread and Liberty party and the Socialist Poplar Alliance party (SPAP). They said that this decision will impact low-income citizens as prices will rise while the value of the national currency will fall, thus they will be unable to afford the forecasted high cost of living.

Citizens expressed their anger on social media platforms, complaining that their financial conditions could not afford the expected increases in prices as a result of the pound’s flotation.

Among the other conditions the IMF attached to the $12bn loan is reducing subsidies. Late Thursday night, the state decided to increase prices on petroleum products, which will lead to higher transportation costs.

Alaa Essam, the youth general secretary of the Al-Tagamou party, commented to Daily News Egypt that the state could have limited the petroleum price changes to fuel only, which higher-income citizens tend to utilise, and not diesel or octane 80, which is preferred by public transportation.

He said that the government failed to deal with Egypt’s deteriorating economy and missed out on taking alternative measures.

Al-Tagamou party previously rejected the the IMF’s conditions, believing such terms will only cause the current economic situation to grow worse over time. Al-Tagamou party is considered a general supporter of government policy.

Head of the SPAP Medhat Al-Zahad agrees, saying that the state is trying to convince people that these decisions will contribute to economic reform, especially once the IMF loan comes through. He said that the state’s debts will increase, especially as Egypt does not have enough resources to pay these debts back. He noted that his party and others, as well as economic experts, have warned against the consequences of this loan, but the state did not respond.

Al-Zahad believes the high prices will lead people to go out into streets and protest. In this case, he said, no one could blame them. Citizens will develop pessimistic attitudes and grow angry, and will subsequently choose to take to the streets to voice their concerns.

“I cannot consider these decisions as helpful towards reforming the country economically. But I can’t even blame the state, because it was already walking down the wrong road from the very beginning. This ending was expected,” Al-Zahad said.

He concluded by saying that there were several alternatives that could have been taken so as to not reach this point. Egypt could have ceased constructing its national mega projects that are consuming a great deal of money, such as the New Administrative Capital and the 1.5m-acres reclamation Project, said Al-Zahad.

Nafaa, Essam, and Al-Zahad agreed that the only ones who will benefit from the IMF’s terms are businessmen and their projects, as they will not be affected by the price hikes as much as ordinary citizens. The three also believe if the situation is not solved, 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.

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Nightmare on the Nile: Egypt’s devaluation

#EgyptTurmoil

Amr Khalifa's picture
Topics: 

Without an effective safety net for millions who will be hit hard by the devalued pound, Egypt’s government may be the one in need of saving.

On a visit to Cairo in late April, the unofficial exchange rate stood at 10.5 Egyptian pounds (EGP) to $1. Earlier this week, a dollar fetched 18.25 EGP in the parallel market. “Business is grinding to a near halt in Egypt," reported Reuters.

With prices soaring, sometimes on a daily basis, it must look to the Egyptian public as though a stampede of elephants is hurtling in its direction

Yet, in a public statement on the same day, Egypt’s prime minister insisted “the problem is not economic". So now the inevitable happens: today, the pound has indeed been floated, devaluing it initially by 48 percent to 13 EGP. The repercussions will be massive. Of that, there can be zero doubt.

With prices soaring, sometimes on a daily basis, it must look to the Egyptian public as though a stampede of elephants is hurtling in its direction.

A journalist affiliated with a venerable organisation, on social media, spoke the unspeakable and called it a “panic“. As the pound plunges, further fears of hyper-inflation stoke other associated malaise. This plunge and a planned devaluation of the pound have put analysts and laymen alike in the crosshairs of uncertainty.

‘We are now in hell’

Even as the World Bank stands at the ready, willing to put “its money on the table", Christine Lagarde, IMF managing director, stated the obvious about the Egyptian currency markets, this past weekend: “There is currently a crisis."

She is correct: “There is a 100 percent" differential between the official price at 8.88 EGP and the “grey market price" at over 18 EGP. The nature of that interplay has a direct impact on the prices of imported goods, leading the Minister of Supply Khaled Hanafy to say earlier this week, when speaking about the deficit in rice to parliament: “Help me, may God help you."

An elderly Egyptian woman walks in a market in Cairo (AFP) 

The currency crunch, in and of itself, is not the central issue. Rather, it is a reflection of deep-seeded structural economic problems. How the currency market, IMF conditions, consumer prices and inflation are all affected by one another will, without much doubt, decide whether the Sisi government is capable of surviving the maelstrom.

Mohamed El Dahshan, an Oxford-trained economic expert and non-resident fellow with Tahrir Institute for Middle East Policy, believes the worst is yet to come. “We are now in hell and the only way out is through," he told me this week.

The untreated toothache

Two issues often cloud the view when it comes to economics in Egypt: a lack of transparency and clarity from Egyptian authorities and the resultant confusion of the populace.

So let’s simplify things: think of a lingering toothache, if you will. Problems of that sort do not fix themselves and the longer you ignore it, the more it hurts. Eventually, instead of an easy fix at an early stage, a tooth extraction or oral surgery becomes an urgent necessity.

Relations between the IMF and Egypt are contentious at best, with historical issues of trust – or lack thereof

An experienced dentist and a willing patient can end the pain. But in our situation, we have a doctor-patient relationship on the rocks. Relations between the IMF and Egypt are contentious at best, with historical issues of trust – or lack thereof.

But, as El Dahshan said, Egypt has no choice: “We are past the luxury of choosing a solution…[our] back [is] against the wall.” Today, the Central Bank of Egypt recognised the same.

While progressive devaluation “would have been nice”, he said, no matter what degree of pain Egyptians go through at this point, the only procedure powerful enough now – and the one prescribed by Lagarde and most experts – is shock therapy devaluation.

Logic and reality have Egypt in their vice grip: the time for devaluation is now.

Falling through the nets

Ordinarily, when examining potential scenarios, some will see the glass half full and others half empty, but the nature of this crisis is serious, something that economic experts recognise. In a discussion this week with Fatma al-Assyouti, an Egyptian economist and researcher, she focused on the effects on the Egyptian consumer – and with good reason.

While being more optimistic than others on inflation, she envisions inflation close the 20 percent range, high enough on its own. But after devaluation, she warns “the impact will be negative on prices…the poor can and should be protected”.

An Egyptian man drives carrying bread on his car in September 2015 in Cairo (AFP) 

Social safety nets are packaged as part of the IMF solution, but in Egypt’s case, they would not be a solution because of the country’s systematic corruption and “many deserving people fall through the net,” said Dahshan. With the safety nets mired in corruption, worries run high.

So it must be asked: if they are failing the poor now, how, without structural and enforceable changes, will those nets protect the vulnerable later on? Bear in the mind that the role of the Muslim Brotherhood as a social safety net for the poor, a role played well especially in poorer neighbourhoods during Mubarak’s era, is a thing of the past.

You had to have been sleeping in a cave in recent months to miss the videos, posts and pictures showing the suffering of a large section of Egyptians under the weight of rising costs of rice, sugar and flour, just to mention a few food items. It is about to get much worse.

Life or death goods 

There are critical nuances to the food commodities market that escape the layman, but are important to understand, Noaman Khalid, an economist with CI Capital Management, explained to me. Sixty to seventy percent of goods are imported at black market exchange rates, but the truly life or death goods – the most basic foods on which the vulnerable rely – are bought on the official exchange rate.

With the devaluation, these effects will be monumental, Khalid explained. Those basic foods “will be repriced (at) the new rate" and the result will be a catastrophic rise – as high as 40 percent, he said.

Those most vulnerable number in the tens of millions in a country as strapped economically as Egypt, and today many must be praying the government knows what it is doing.

The IMF head of delegation for Egypt, Chris Jarvis (L), Egypt’s Minister of Finance Amr al-Garhy (2-L) and Central Bank of Egypt chief Tarek AmeR (C) at a press conference in Cairo on 11 August 2016 (AFP) 

The last time Egyptians revolted against price hikes was January 1977 when IMF-related hikes hit the all-important bread sector. A “lack of communication" by government did not help matters, said Assyouti. But this time around it will affect many more sectors than bread and, if anything, communication between Tareq Amer, head of the Central Bank of Egypt, the people and the market is at an all-time low.

A quick scan of social media in the past 10 days relays a picture of confusion and panic. “Do you know what is happening?” is a common refrain.

Amer should shoulder much of the blame for this lack of communication, argued Khalid. “He kept giving signals for several months without taking any action," said the economist. This “caused him to lose everyone’s trust," and, in the process, decreased his credibility.

Where there is no trust, how can there be an effective execution of such a delicate procedure like devaluation at a time of great political and economic instability?

One choice: jump

Why does Egypt need to devalue? With inflation hitting 15.5 percent, and food costs the highest they have been in five years, a country strapped for foreign reserves struggling to maintain enough for a necessary devaluation, and an IMF that has, clearly, enunciated the need for the move, this is no longer optional, but a must. It is no wonder the trigger was pulled.

What to expect now that the pound has been floated is deeply concerning to all Egyptians – for varying reasons. From Assyouti’s perspective, Egypt will continue to “muddle through until there is a better government and a better governor of the central bank“.

Imagine a burning apartment building with the poor on the roof. There is but one choice: jump

This seems to be a recurring theme: Amer of the CBE is not the right man for the job. Such a sensitive position should not be filled by someone with a background in banking, but by an economist, said Khalid.

Yet choosing Amer to lead is just the kind of decision-making emanating from the Egyptian leadership – and why there are justified concerns that a crisis, instead of being managed properly, may turn into a fully fledged disaster.

Those most vulnerable Egyptians number in the tens of millions (AFP) 

If inflation is to double “within the next few months“, as Dahshan predicts, it will be at “30 percent-plus" as a direct result of the floating of the pound and compounded by a rising international food commodities market. Such a hyper jump in prices will greatly pressure a regime already losing supporters by the droves.

You can suppress and oppress and many in this ultra-nationalist environment will not flinch. But tell these same hawks, from various economic classes, that the price of rice, sugar, wheat – directly impacting bread – will rise 30 percent, and essentially, what you are saying is that they are taking their political life into their hands. Under enough economic pressure, Egyptians will not wait for potentially positive, long-term, outcomes such as increased foreign investment.

Imagine a burning apartment building with the poor on the roof. There is but one choice: jump. There will be damage. It may only be a broken arm or leg if we are lucky, perhaps some cracked ribs. But for some – the poor atop the building –  the jump may be fatal.

Jumps from the fifth floor kill. But jump Egypt just has.

If the government is not ready with an effective safety net, it may be the one in need of saving.

– Amr Khalifa is a freelance journalist and analyst recently published in Ahram Online, Mada Masr,The New Arab, Muftah and Daily News Egypt. You can follow him on Twitter@cairo67unedited.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Eye.

Photo: Egyptians buy sugar from a truck in the capital Cairo on 26 October 2016, as the country suffers from a sugar shortage (AFP).

This article is available in French on Middle East Eye French edition

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