CAIRO – Egypt’s prime minister tried to reassure an anxious public on Friday as Egyptians expressed alarm and anger over prices that swiftly soared a day after the nation’s currency was floated, sending its value tumbling as fuel subsidies were cut.
In the capital’s working class district of Imbaba, residents spoke of a sudden spike in transportation and food prices, mainly because of the increase in petrol costs.
Gaber Ramadan, a manual labourer, told The Associated Press that his commute to work rose from 2 to 3 pounds overnight, and even his morning falafel went up from a quarter to a half pound. Even the slightest increase stings, he said, as he earns 1,200 pounds a month, a third of which goes to rent.
The unprecedented shock therapy measures are part of a raft of reforms aimed at salvaging Egypt’s crumbling economy and securing a $12 billion IMF bailout.
But it has also raised fears of a backlash from a public already struggling with high inflation and mounting unemployment.
“People are tired, really tired,” said Ramadan.
A young salesman at a nearby mobile phone shop, who identified himself with his first name Hamada, yelled: “We are worth nothing!”
On Thursday, the Central Bank devalued the Egyptian pound from 8.8 to 13 to the dollar, and then floated it. By Friday, the pound was at 15 to 16 to the dollar.
At midnight on Thursday, the fuel subsidy cut also came into effect, increasing gas prices by 30 to 47 per cent, depending on the type.
Prime Minister Sherif Ismail appeared on state TV at a press conference with six other ministers, and said the government doesn’t have the “luxury” to wait.
“It is our destiny to take action in the face of the current economic situation,” he said, arguing that the way forward is to attract foreign investment to provide more job opportunities and increase exports. Egypt currently imports a third of its needs in goods.
But he pledged that steps would also be taken toward “improving the living conditions of citizens.” He said past measures were only temporary “pain relief,” but that the latest drastic moves were part of a comprehensive reform program.
The government aims to achieve a growth rate of no less than 6 per cent, compared to the current 4.3 per cent, and reduce the budget deficit from 12 to 10 per cent, he said.
The move was praised by the IMF and local business community as a belated and much-needed step in the right direction.
Egypt’s foreign currency reserves dwindled in recent years as tourism dried up over fears of terrorism, remittances dropped because of low oil prices, and Suez Canal revenues diminished because of a decline in global trade. Investment and business activity stalled, with inflation hitting 14 per cent and unemployment 13 per cent. Government efforts to shore up the currency generated a black market where the dollar reached a rate of 19 pounds — compared to 8.8 in the banks.
In recent days, basic commodities like sugar have been all but absent from markets, and President Abdel-Fattah el-Sissi risks paying a heavy political price.
Ismail appeared to recognize this reality, and referenced the 1977 bread riots that erupted over austerity measures which had also included subsidy cuts. Then-President Anwar Sadat deployed the military to quash ensuing riots, and was eventually compelled to cancel the austerity measures. Ismail said cancelling the cuts back then led to mounting budget deficits, which the country has been enduring ever since.
Aspiring to a better future, Egyptians have changed their president twice in the past six years. The 2011 uprising ousted autocrat Hosni Mubarak, and in 2013 the military removed the elected Islamist president Mohammed Morsi. With each transition, instability has devastated the economy.
El-Sissi, who led the military ouster of Morsi, was elected on a platform that promised security and stability. Under his rule, security forces have cracked down heavily on Islamists and dissenters, preventing any significant protests for the past two years. But with a move set to radically disrupt a subsidy system that has been in place for decades, el-Sissi risks galvanizing his opposition.
For weeks, there have been calls on social media for mass demonstrations on Nov. 11. And while many political forces have distanced themselves from the call, the Interior Ministry still issued warnings of “conspiracies to incite chaos” — a naked reference to what it considers rabblerousing by the now-banned Muslim Brotherhood group.
Capitalizing on the public mood, Brotherhood supporters called on Friday for protests to demand the ouster of el-Sissi.
“Raise the pound with your protests; remove el-Sissi the failure,” a statement by an Islamist alliance said on its Facebook page, calling for a “week of rage” against the government’s economic policies.
In Imbaba, some said they will demonstrate on Nov. 11.
“I swear to God, I went to the street for el-Sissi before. This time I will go again against him because I don’t want him,” said Ramadan, the labourer. “He was a trap.”
A minibus driver, Khaled Fathi, said the cost of filling his tank on Friday went up 30 per cent to 60 pounds. In turn, he increased his fares to 1.75 pounds from 1.15, angering commuters. “Since the morning, I have been in endless arguments,” he said.
“The prices of everything around us are increasing, except for human beings. People in Egypt are very cheap,” he said. “I will go out and we have nothing to lose.”
Although El-Sissi regularly justifies heavy-handed security measures against dissent as the cost of stability, violent attacks in the country haven’t ceased since the 2011 uprising.
On Friday, authorities reported that a car bomb allegedly targeting a judge involved in a terror-linked case, exploded on Friday near the popular Al-Ahly Club in the eastern suburb of Nasr City, damaging several cars but causing no injuries.
Meanwhile, militants also killed a senior army officer in the restive Sinai Peninsula’s el-Arish, where the army has been battling Islamic militants.