Inflation Crisis in Egypt and its Affect on Families
Inflation, in economics, is a measure of the rate of increase in the general price level of goods and services. In Egypt, inflation has been an issue for many years but has worsened significantly since the economic reforms in 2016, which included devaluing the Egyptian pound and withdrawing subsidies on fuel and electricity. Indeed, the dollar exchange rate has exceeded 32 pounds, as its value decreased by 33% in various stages so far. Since last March, the pound has lost half of its value against the dollar, and according to official statistics, the prices of food commodities increased by 37.9%. Unfortunately, inflation in Egypt is anticipated to rise by 7.5% in 2023 as reported by the Ellen MacArthur Foundation. This prediction was written in the "Egypt 2030" report, a financial analysis released earlier this month, March. The report justifies the inflation rise primarily due to the rise in wages as well as expensive imported commodities. In fact, this inflation is a heavy burden on the average-income Egyptian family in addition to the poor who are suffering more and may have to reduce their share of food, which may lead to a food crisis in the near future. Regarding the Central Agency for Public Mobilization and Statistics (CAPMAS), the poverty rate in Egypt grew from 29.7% in 2015 to 32.5% in 2018. As announced in March, inflation across the country went up to its latest level of 32.9% while the monthly inflation rose to 7.1%, driven by a dramatic increase in food prices. This actually threatens a change in the Egyptian social structure.
The coronavirus pandemic has had a major impact on the Egyptian economy. The pandemic has caused supply chain disruption, reduced demand for some commodities, and cost increase of other goods. Furthermore, the pandemic has forced many businesses to close, leading to job losses and lower incomes for many families. The strength of COVID-19 has also highlighted the need for more investment in Egypt's agricultural sector. This leads to investment in local food production, enabling Egypt to reduce its dependence on imports and improve food security. Similarly, this has become more crucial since the outbreak of the Ukrainian war; however, inflation remains a major challenge at the internal level of the country, as food prices rose by a record rate of 48% compared to the same period last year. This is the highest inflation rate since 2014 when the country was confronting a severe economic crisis.
The Egyptian government has taken some steps to address the inflation matter and the rising cost of food. In 2020, the government introduced a food subsidy program to assist families cope with the increasing cost of food. The program provides families with a monthly allowance of 50 Egyptian pounds ($3.20) per person to buy basic foodstuffs. Besides, the government has also taken some measures to reduce the cost of fuel and electricity, which will result in reducing the food production and distribution costs.
Hassan, an Egyptian citizen in his late twenties, said that his salary in the same month of the previous year was 9,000 pounds (equivalent to 524 dollars) and his salary has currently, after a year, become 10,000 pounds (equivalent to 285.7 dollars). Paradoxically, despite its increase in Egyptian pounds, it got devalued, around 40% or more against the USD. As a result of the increase in the dollar exchange rate, all prices have inflated. Since the value of the Egyptian pound has dropped, it becomes difficult to live with the current situation of continuous increasing inflation day after day. Therefore, he needs a new source of income to keep up with rising prices, forcing him to reduce his consumption and expenses. "I am honing some of my skills as a mechanical engineer to work as a freelancer on some websites to increase my income or earn some dollars so that I do not get affected by the exchange rate and the inflation that strongly affects me and my family." Says Hassan. "I am now waiting for a new baby within months, and therefore my family will increase a person, not to mention the birth and newborn expenses, such as baby supplies, accessories, and treatments." He also expressed his hope that the situation will be resolved and improved, that the inflation and economic crisis must end very soon, and that his ambitions and dreams are greater than his despair; he is full of hope while waiting for urgent economic reforms.
