Egypt’s decision to devalue the pound has spread a state of frustration on the Internet and in the streets at a time when Egyptians are complaining about everything, from the price of diapers to the price of chicken, after years in which they suffered from poor living conditions.
President Abdel Fattah El-Sisi allowed the exchange rate of the Egyptian pound to be devalued in an effort to restore economic stability in the most populous Arab country with the help of billions of dollars in Gulf investment flows.
But some Egyptians wonder whether such high-profile moves will provide relief after years of hardship.
A doctor named Iman Hussein said that the flotation “will increase the suffering of citizens. It would have been preferable for this step to be delayed a little. If the state did not provide a dollar, it would still have the same problem. This is temporary housing and we will return to two prices for the dollar again.”
The Central Bank of Egypt said it raised interest rates by 600 basis points and would allow the pound to trade freely.
The bank said in a statement on Wednesday that the announced monetary policy decisions come “within the framework of a comprehensive economic reform package in coordination with the Egyptian government and with the support of bilateral and multilateral partners. In preparation for implementing the reform program measures, the necessary financing has been provided to support foreign exchange liquidity.”
Egypt previously said it would switch to a more flexible exchange rate in which it manages the currency more closely whenever the pound weakens. This time, it may be betting that the value of the pound will not collapse, depending on hard currency inflows from investment projects, including a $35 billion deal with the UAE signed in late February.
The announcement on February 23 that the UAE Sovereign Fund (Holding Fund) would invest $35 billion within two months in developing a new city on the northern coast of Egypt and other projects led to a reduction in pressure on the Egyptian pound on the black market. The Egyptian government says $10 billion of this money has already been transferred.
He wrote in a blog post on the “X” platform that mocked the situation and said, “We (obtained) 35 billion, so we licensed Pampers (diapers) for now.”
On Wednesday, the International Monetary Fund also approved a long-awaited loan to Egypt worth eight billion dollars, down from only three billion dollars.
A large sector of Egyptians suffered from economic difficulties for years while Sisi spent billions of dollars on a new capital, bridges and other infrastructure.
The main project is the new administrative capital, which costs $58 billion and is located east of Cairo, and Sisi says it will represent the birth of a new republic.
The standard of living of many people declined and they suffered sharp increases in the prices of everyday goods and services. Estimates indicate that 60 percent of the population of 106 million people live below or around the poverty line. Basic commodity prices rose.
At a time when a large segment of Egyptians suffered from financial hardship, Sisi asked them to bear more economic pain and said that his huge projects would provide job opportunities.
Al-Sisi, who took power after claiming the overthrow of his democratically elected predecessor, said, “Everything is insignificant except our country. I mean, won’t we eat? We won’t eat, won’t we drink? And everything is okay. Is it expensive or some of it is not available?”
Although the influx of funds from the Emirates may relieve pressure on the country, many Egyptians have doubts.
Iman Hussein said, “Floating may be beneficial for improving the economy, but it will negatively affect Egyptian citizens. A further decline in the level of the pound and an increase in the prices of all goods in light of low wages will increase suffering for citizens.”
The Egyptians took advantage of the rise in prices as material to joke about their poor economic conditions and published some posts on the “X” platform mocking their losses after the devaluation of the pound.