Economy

Egyptians suffer austerity squeeze as economy stabilises

By AFP

image

People queue to get on a train at a metro station in Cairo on May 28th. While Egypt's economy is displaying signs of recovery, citizens are facing water, fuel, electricity and metro cost hikes. [Khaled Desouki/AFP]

While Egypt's economy is displaying the green shoots of recovery, citizens are enduring relentless price rises covering everything from water to metro tickets.

At Cairo's al-Zahraa metro station, nestled among red-brick apartment blocs in a middle income neighbourhood, 46-year-old Omm Mohamed laments the government's economic overhaul.

"The burden has become too heavy, it has become unbearable," she said, adding that the rise in metro ticket prices has particularly affected her daughter, who takes the metro to work at a private hospital.

On top of the metro fare, Omm Mohamed's daughter, who earns a "modest salary", is one of many Cairo residents who has to take tuk-tuks and microbuses to work.

On May 11th a uniform two-pound ($0.11) metro ticket was replaced with fares ranging from three to seven pounds ($0.16 to $0.39). Barely a year ago, fares cost just one pound ($0.05).

The latest fare rises sparked street protests last month, with security forces arresting around 30 people and later releasing some of them.

'The burden will double'

Egypt's austerity policies are tied to $12 billion in loans from the International Monetary Fund, secured by Cairo to ease a fiscal crisis that saw its deficit balloon to 12.5% of gross domestic product (GDP) in 2015-16.

On Saturday (June 2nd), the government announced a hike in drinking water prices that in some cases exceeds 45%.

Further measures are to come, with energy prices due to rise in July.

"The burden will double," Omm Mohamed said.

Seeking to cut the country's deficit, authorities also have introduced a value-added tax, cut fuel subsidies and increased electricity prices.

Officials are repeatedly warning of more electricity price hikes and a reduction in fuel subsidies, prompting media outlets to prepare the public for the changes.

Last week Al-Ahram newspaper ran a front page about the price of oil, stating fuel subsidies cost the public purse 104 billion pounds annually ($5.8 billion).

The government has yet to announce the scale of the next price increase and cut in subsidies.

But Alia al-Mahdi, an economics professor at Cairo University, said the metro protest set off "alarm bells".

"The Egyptian people have suffered many shocks in the last two years in consecutive price increases," she said.

The metro ticket change alone saw transport costs jump from 5 or 6% of poor Egyptians' total spending to 20%, al-Mahdi explained.

'Sacrifices' required

The rising costs come against a backdrop of economic recovery, with GDP growth increasing in the past year from 4.2 to 5.2%.

Meanwhile, inflation eased to 12.9% in April, after reaching a peak of 34.2% last July.

The unemployment rate dropped to 10.6% in the first three months of 2018, against 12% a year earlier, according to the government's statistics bureau.

Despite the positive figures for the national economy, price rises have disproportionately affected low earners, according to Omar Adly of the American University in Cairo.

"There are other means to reduce the budget deficit which could reduce the pressures on the poor and lower middle income-class," such as tax rises, said Adly, a development professor.

But the IMF contends that the bitter reform medicine will benefit everyone.

"While the process has required sacrifices in the short-term, the reforms were critical to stabilise the economy," the lender said on May 17th.

Such an economic overhaul will "lay the foundation for strong and sustained growth that will improve living standards for all Egyptians", the IMF added.

Do you like this article?

12 Comment(s)

Comment Policy * Denotes Required Field 1500 / 1500

Countries develop through agriculture and industry, but Egypt doesn’t admit that. We’ve never heard that collecting money from the poor, receiving debts from other countries, and failing to create productive projects can push economies ahead.

Reply

I don’t know when things will be fixed for Egypt’s Railway and when its name will become true?! We’ve had enough. It looks as if this is done on purpose by some people to make this vital facility fail although it’s been in operation for more than 184 years! It was built in 1834, if my memory serves me well. Egypt’s Railway was constructed at the time of British occupation of Egypt. It was the first railway in Africa and the Middle East, and the second in the world (after Britain). It’s been working until they neglected maintenance for tracks which was done every day. We would see workers working on them very hard every day. They would fix the lines, maintain the tracks and posts, helping trains move safely. They used to live by the tracks so they would be prepared for any emergency. They were always on standby. We have every right to suspect. Whoever objects to this can present their justifications. The maintenance workers who used to maintain trains and sings have disappeared. Nobody now cares about the vital facility and wishes it to continue to operate. We didn’t find anyone who would care about passengers’ lives. Train ticket prices have increased over and over again, but citizens only found death and destruction!

Reply

What has brought the castle to the sea?! Good morning!

Reply

Good!

Reply

Al-Sisi and his men wanted to remove Mubarak and his family from the rule of Egypt, and we paid the price.

Reply

We supported you wholeheartedly, Sisi, and hoped that you would fight corruption which has grown and prospered over three decades. However, we were disappointed. It’s true that we need economic measures, including the lifting of subsidies which mostly go to people who don’t deserve them. Such subsidies have always been used for enrichment, and little of it went to the poor. They gave us animal fodder to eat, together with commodities not fit for human consumption. The state mustn’t be responsible for distributing commodities, and subsidies must be given to the poor in the form of money. BTW, I’m not entitled to receiving subsidies. However, when harsh economic measures are taken when there is corruption, theft, government extravagance, nepotism, etc., I don’t support you. I no longer support you. Sir, reform starts with the individual, teacher and school; when we have good education, we will make progress. Progress can’t be made through the construction of roads and concrete blocks.

Reply

Al-Sisi has ruined Egypt. The government is covering him up, and you say that Egypt's economy has recovered?! Bless you!

Reply

Any economic reform without putting an end to corruption; stopping government extravagance; ensuring transparency; protecting the poor classes; distributing burdens based on income; reforming the losing economic institutions; cancelling all honorary and advisory positions; cutting diplomatic missions and enforcing the highest limit of salaries is a punishment for the poor and a precursor for a revolution of the hungry that will destroy everything. May God preserve Egypt and its people against all evils! One prayer of the Prophet (PBUH) was that “O God, who (happens to) acquire some kind of control over the affairs of my people and is hard upon them, be You hard upon him, and who (happens to) acquire some kind of control over the affairs of my people and is kind to them, be You kind to him.”

Reply

This is one hundred percent correct. Reform must start by putting an end to illiteracy through a real education project in which the Egyptian human wealth is benefited from.

Reply

How can the state’s economy be built when its wealth is being stolen? How can the state’s economy be built when the parliament doesn’t heed people’s demands? How can the state’s economy be built when its wealth is being distributed to artists, media professionals and MPs who travel at the expense of people, while there are people starving to death? Enough is enough!

Reply

To alleviate burdens on the poor and low-income people, the Egyptian government must look for those who have amassed their wealth from robbing state money and issue a law that questions the source of wealth. It’s not logical that an employee whose salary isn’t more than EGP 2,000 own a wealth of about 100 million! Where is the Administrative Control? Where’s the Central Auditing Agency? Unfortunately, honest people in Egypt are bearing the brunt of price hikes, while the state is asleep, and thieves sing to the love of Egypt although it was them who robbed Egypt and its wealth.

Reply

By God, this calamity is from God. May God alleviate it for us!

Reply