Egypt feels the pain of global turmoil caused by war and pandemic

When the state-owned factory where Hesham el-Atar worked for 15 years liquidated this month, he said it was linked to international pressure to reduce the Egyptian government’s role in the economy amid a deep recession. I felt that there was

El-Atar, 39, was the supervisor of the El Nasr Coke and Chemicals Plant, which turns coal into a fuel called coke used in steel production. Now that his daily expenses have increased, El, about two hours south of the Egyptian capital, is worried that he will not be able to find another job near his home in the city of Saf. .

“I don’t know what to do,” he said. “I have four children. We are used to a certain standard of living. It will have to change.”

Egypt, which relies heavily on imports and foreign borrowing, has been hit hard by the global trade cascade from the pandemic and Russia’s war with Ukraine. Withdrawal of foreign investment capital, collapse of tourism industry and soaring commodity prices have all led to foreign exchange shortages.

Governments have responded by enforcing more onerous import rules, devaluing local currencies and pushing up interest rates. We are also taking steps to privatize and close state-owned enterprises. This is a major demand of international investors and creditors, who argue that the government’s enormous role in the economy hinders private investment.

At the same time, however, Egypt this year saw a $22 billion investment pledge from wealthy Persian Gulf allies fearing to see one of the pillars of the Arab world on the brink after a decade of turmoil that began in 2011. Succeeded in raising more than a dollar. Uprising.

Consumers were quick to feel the impact of the government’s response to the crisis. This was especially the case for Egypt’s middle class, which has been eroded by a persistent lack of employment opportunities, declining consumer subsidies, meager spending on health and education, and a regressive tax system. No small part of funding a grand infrastructure project.

Import regulations introduced earlier in the year required businesses to pay for their goods in advance through the national banking system. As a result, some imported goods got stuck in ports, causing shortages, but the government has since taken steps to alleviate the problem.

In March, the central bank devalued the currency by about 14%, sending prices soaring. But the salary was not.

“We have to pay European prices for Egyptian salaries,” said Mona Hosni, 34, from Cairo. “Our salaries are not like Europeans!”

Hosni works on one side of Cairo and studies on the other. Due to her rising prices, she cannot afford to move out of her parents’ house in the suburbs of Helwan. So she spends about three hours a day driving her 2011 Nissan between her home, school and work.

New cars are out of the question.

The roads she drives are lined with billboards advertising new developments and luxury real estate, while much of the country remains impoverished.

In recent years, President Abdel Fattah El-Sisi has overseen a huge construction boom, borrowing from abroad to fuel Cairo’s relentless sprawl. The government is building a new capital in the desert not far from the current capital at a cost of about $59 billion.

Samer Atalah, an economics professor at the American University in Cairo, said the country was in huge debt. Sustainable economic growth or stable government revenue.

“Fundamentally, the economy was preparing for the crisis,” he said.

The government is in talks with the International Monetary Fund about financing. Economists estimate Egypt may need $15 billion over the next three years, but say the government will seek smaller packages. And Egypt is expected to devalue its currency further in the near future.

Governments must balance the demands of investors (whose funds may help alleviate the economic crisis) with the risk of implementing measures that may cause further economic distress to citizens. Hmm.

International financial institutions are pushing Egypt to privatize its economy as a way to achieve more sustainable economic growth. Much of the economy has long been controlled by the state through moribund state-owned enterprises.

In the case of the El Nasr factory, where El Atar worked for 15 years, the government said last year it suffered a loss of about $1.5 million and had no chance of modernizing or improving its financial position. According to news reports and government documents, the factory, which began production in 1964, was emitting severe pollution.

El-Atar is currently a union representative negotiating a severance package for workers, but whatever agreement is reached, the money is certainly far away given the rising prices and devaluation of the currency. I won’t go to

Military control over various businesses has stifled competition from the private sector in industries from concrete to pasta production, relying on advantages such as free conscripted labor and exemptions from taxes and customs fees.

Egypt has previously promised to privatize instead of complying.

Across Cairo, people from all walks of life are being forced to adjust their daily lives to adapt to economic pressures.

Two owners of a suburban auto repair shop said the price of needed parts from Europe had skyrocketed and they were losing customers because of the high prices. Business is half what it was before the pandemic, they added.

General Manager Mostafa El Gamal said: “It’s showing up in everyone.”

No one has been laid off, but wages at the store have stagnated.

El-Gammal said he tried to protect his four children from economic decline. However, at the beginning of the new semester, he went to buy two rucksacks and was surprised when he paid twice as much as he had before.

His colleague, Mohamed Farouk, 33, who runs an auto shop, said he transferred his 6-year-old son to an affordable school near his home in Nasr city, another district of Cairo.

The government is also trying to boost revenues by raising fees for services.

Assem Memon, 39, runs AdMazad, a private company with 14 employees that collects data on billboards and sells it to companies looking to optimize their advertising campaigns. He said the slowdown and devaluation of the economy have complicated plans to expand outside Egypt.

The government is a headache for employers, Memon said, including the Treasury Department’s new online portal that must be used for all business-to-business transactions. Its purpose is to allow the government to verify all transactions.

Some withholding practices have also changed, reducing cash on hand, he added. He said he understands that governments are looking to raise revenue, but that this approach could discourage entrepreneurship.

“It’s stifling small businesses,” he said.

Gamal Osman, 59, a warehouse worker in Tanta, a city about two hours north of Cairo, said prices for basic services such as identity card renewals have also increased. He said he cut down to eating meat only once every two weeks and still couldn’t save as much money as he used to.

“You can feel it in everything you do,” he said. “From the moment you go out to the moment you go to bed”

Still, some people see opportunity in difficulties.

Mohamed Ehab is the marketing director of the automotive company that introduced the Chinese brand Jetour to the Egyptian market in 2020. Sales were booming last year, but new import rules disrupted business.

The company stopped taking orders a few months ago and is focusing on expanding its service centers.

Ehab said there is still demand for practical family cars, even after the devaluation caused prices to soar. The company’s lowest priced car has risen from about $18,000 to $26,000. This is mainly because importers have to pay China in dollars.

But he hopes the impasse will spur the government to offer incentives for automakers to assemble their products inside Egypt.

“It’s a tough time right now, but I think it’s part of a bigger, better story,” he said.

[This article originally appeared in The New York Times.] Egypt feels the pain of global turmoil caused by war and pandemic

Back to top button