Declining value of Egyptian pound puts the squeeze on consumers

The fall of the Egyptian pound means rising prices in an economy bedevilled by entrenched inflation and stagnating living standards.

A fall in the value of the Egyptian pound hit pocketbooks in Egypt last month, further raising prices in an economy bedevilled by entrenched inflation and stagnating living standards.

A third of business in Egypt’s non-oil sector registered increases in the cost of input materials in March, while wages rose for only a small number of employees, according to data from the HSBC Purchasing Managers Index, a monthly economic survey.

The pound has fallen from 7.15 to 7.26 against the dollar – a drop of 1.5 per cent, after the central bank devalued the currency on January 16, pushing up the cost of imports.

The overall Egypt PMI stood at 49.6 in March, indicating a marginal contraction in economic growth. Any score below 50 indicates a worsening of economic conditions.

“Egypt’s non-oil private sector remained in contraction territory in March, continuing the trend observed so far in 2015,” Markit economist Philip Leake said. “As a result, the outlook for Egypt remains uncertain, with the depreciating pound providing a key source of instability.”

Export orders, backlogs and output all fell, the survey found, indicating that economic growth was depressed in March.

Egypt’s economy grew at 4.3 per cent in 2014, which represents the country’s best performance since the Arab Spring.

But with inflation in double digits and the country’s population growing at 1.5 per cent per year, many Egyptians are unlikely to see real increases in their standard of living.

More than US$60 billion of future foreign investment projects were announced last month at Egypt the Future, a major investment conference held at Sharm El Sheikh.

While analysts pointed out that many of these projects have long lead times, and faced considerable execution risks, economists were broadly optimistic about the likely impact on the Egyptian economy.

Around 60 per cent of the Egyptian population lives on less than $4 per day, according to the World Bank, meaning that the president Abdel Fattah El Sisi’s government faces an uphill struggle to improve the lives of the country’s population.