Egyptians from all walks of life are feeling the pinch after the pound fell to a value close to LE15 for every US dollar on Sunday and the government cut fuel subsidies, leading to fuel hikes of up to 47 percent.
Egypt’s Central Bank liberalized the exchange rate on Thursday, leaving the value of the pound to the discretion of the banks. Although the pound began at a guidance price of LE13 to the dollar Thursday, it quickly weakened to LE15.75 to the dollar on Sunday at the National Bank of Egypt, and to LE15.5 at the Commercial International Bank.
In an effort to curb inflationary repercussions, the Central Bank also raised interest rates by 300 points, increasing deposit rates by 14.75 percent and lending rates by 15.75 percent.
Unlike the last time fuel subsidies were cut in 2014, the government has not immediately announced new transportation fares for taxis and microbuses, leaving many drivers and passengers to negotiate the cost of travel on a trip-by-trip basis.
Increases have varied from governorate to governorate, despite the government announcing that they would be between 10 to 15 percent.
Microbus prices will increase by 50 piasters for long routes and 25 piasters for shorter routes in Cairo
Around midday on Sunday, the Cairo Governorate released official microbus price increases of 50 piasters for long routes and 25 piasters for shorter routes, Al-Masry Al-Youm reported. Microbus fares in Daqaliya increased by 15 to 20 percent, according to Al-Masry Al-Youm, and the governor of Qena predicted a 15 percent rise, the state-owned Akhbar Al-Youm newspaper reported.Alexandria, Egypt’s second largest city, saw transport fares rise by 20 to 33 percent, according to Masr Al-Arabia.
White taxi drivers petitioned for the Cabinet to raise the minimum fare to LE5 and the per kilometer metric from LE1.4 to LE1.75, the head of an independent association for white taxi drivers, Salah Sedeek, told Aswat Masreya.
State-mandated bus fares will remain the same, Cairo Governor Atef Abdel Hamid told the state-owned Middle East News Agency.
The government is simultaneously raising the prices of wheat, corn and sugar cane
Before floating the pound, the Central Bank offered currency auctions, prioritizing staple commodity imports. This was abolished Thursday, leaving imports of basic foods, medicines and production materials vulnerable to the exchange rate.
Such commodities benefitted from being prioritized when the exchange rate was LE8.88 to the dollar, Amr Asfour, head of the foodstuff division at the Chamber of Commerce, told Mada Masr on Thursday. “Incremental rises in cost will be transferred to consumer prices,” he added.
The government is simultaneously raising the prices of wheat, corn and sugar cane. Wheat will now be purchased by the state from farmers at LE450 per ton, up from LE420, sugar cane at LE500 per ton, up from LE400 and corn at LE2,500 per ton, up from LE2,100.
To ease the pressure, the government announced a 16.6-percent increase in the amount of funds allocated through ration cards, from LE18 to LE21, a change that will begin next month.
The cost of bread is expected to increase, after flour prices rose to LE4,000 per ton on Saturday, compared to LE3,800 last week, the business Al-Borsa newspaper reported.
The impact of transportation hikes are also being felt by industries, with Al-Garhy steel manufacturer announcing increases of LE9,050 per ton for traders and LE9,250 per ton for customers, up from LE7,650, according to privately owned Al-Mal newspaper. Other steel manufacturers are expected to follow suit.
Salaries and savings
In a country where people spend almost half their incomes on food, beverages and healthcare, the recent price hikes are expected to significantly impact people’s daily lives.
The state has promised a number of measures to ease the pressure, including immediately reducing the qualifying age for government welfare provided to the elderly who are unemployed from 65 to 60 years old. Egypt’s seven million government employees are also expecting to receive a 7 percent annual bonus — to be paid retroactively from July. However, this is merely half the inflation rate in September, without accounting for the recent increases and subsidy cuts.
It will be easiest to raise salaries in the public sector, but the private sector will clearly be dependent on economic activity, while the informal sector is likely to respond faster than the others, says Samer Atallah, an economist at the American University in Cairo.
Meanwhile, Egypt’s largest state-owned banks, the National Bank of Egypt and Banque Misr, announced deposit certificates at a 20 percent interest rate for 18 months and 16 percent for a period of three years, in an effort to curb inflation.