Egypt's largest tea distributor has warned that stocks are dwindling and called on the government to ease exchange restrictions brought in to stem the flow of foreign currency out of the country.
Shay El Arousa said stocks are running low and that, as things stand, the company would have to shut operations in the next month.
The company said it has formally requested that the government gives it enough dollars to purchase tea on the global market.
With tea being a staple drink of the masses, El Arosa’s announcement on Monday sparked concern on social media.
According to the United Nations' Comtrade database on international trade, Egypt imported $531.35 million of tea, coffee and spices in 2021.
Tea is not produced in Egypt, despite its popularity among its 103 million population.
In response to growing anxiety and bad press regarding the country’s struggling economy, Finance Minister Mohamed Maait announced at a news conference that some of the country’s importers would get a reprieve from the austere measures placed on them by the government as part of its effort to curb the departure of foreign currency.
The minister told El Hadath El Youm, a TV talk show on a private network; “There will be no issues with tea if God wills it. We are trying our best to solve the problem and will be taking action very soon because the nation’s mood is very important to us.”
Dr Hoda El Mallah, director general of the International Centre for Economic Consultations and Feasibility Studies, told The National that the government might have been too restrictive on some imports earlier this year and is now realising that some goods are simply too essential to restrict, especially in the absence of viable locally-produced alternatives.
“Like many countries in the Middle East and Asia, Egypt relies heavily on importing the majority of its goods. Even the most strategic wares are often imported, such as tea and grains. I think these are the goods that will be allowed to enter the country under the expected easing of restrictions,” Dr El Mallah said.
“I don’t anticipate that the restrictions on importing cars, for instance, are going to be lifted any time soon, at least not until we get our foreign reserves in order,” she added.
After having its exchange rate fixed since 2016, when a currency flotation saw it reach an all-time high of 19.3 against the dollar, the Egyptian pound was in March allowed to trade more freely, resulting in a 14 per cent depreciation which is expected to increase further by the end of 2023.
The latest devaluation was a bid to increase exports’ competitiveness and better position the country for a new loan from the IMF. The decision divided the nation’s economists. Some have said that devaluing the currency can boost exports while others fear the departure of direct foreign investors.
Mr Maait said earlier this week that 10 billion Egyptian pounds ($0.5bn) would be given to the country’s exporters in incentives to bridge the country’s current account deficit, which stands at $20 billion and is expected to rise over the next financial year.
The decision to boost exports is a good move as the country does not have many dependable sources of foreign currency right now, according to Dr El Mallah.
Egypt has four main sources of foreign currency: exports, tourism, Suez Canal transit charges and remittances from Egyptians working abroad.
“With what’s happening to the country’s tourism sector because of Russia’s war in Ukraine, focusing on exports does seem to be the most logical strategy as the canal’s revenue and remittances will unfortunately not be enough,” she said.
The Russia-Ukraine war has taken a heavy toll on the Egyptian economy, with the resulting high energy and food prices causing a spike in inflation — to about 14 per cent — and a drop in foreign reserves, which totalled $32 billion this month, down from just over $40 billion at the end of 2021, according to Trade Economics data.
The two warring countries account for nearly 80 per cent of Egypt’s wheat imports and more than 30 per cent of its tourists.
“Operation costs for all businesses have skyrocketed, but exporters, in particular, are bearing a heavy burden right now, because there is now a pressing need for them to ramp up exports to help stabilise the currency, so I think an aid package from the finance ministry can help them do that faster,” Dr El Mallah said.
The Russia-Ukraine war has also underscored the importance of boosting local production, especially of essential goods like wheat, of which Egypt is the world’s second-largest importer.
“Boosting exports and curbing imports will work for a short period if we use this time to ramp up our local production, however, my only issue with this strategy is that, as it stands, there are few viable local alternatives for many of the goods that Egypt imports and not just luxury goods,” said Dr El Mallah.
A number of goods, including several shipments of tea, have been held up at Egypt’s ports for weeks awaiting the government’s approval to enter. Each day the goods are held results in more costs for importers, who pay a fee to have their goods stored, which in turn will make them increase their prices.
“It’s important to speedily release shipments of the most consumed goods, like tea, because more price increases are going to be difficult to bear for the Egyptian citizen right now,” Dr El Mallah said.