Bitterness as Egypt rolls out economic reforms

2016-10-26 14:13
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Cairo - Facing a weeks-long shortage in a country already restless with rising prices, Egyptian authorities this week raided a Twinkies snack cake factory and confiscated its sugar stocks - all 2 000 tons.

The raid on Sunday on Edita Food Industries, one of Egypt's largest producers, came as discontent with increased food prices and empty shelves bubbles to the surface in the most populous Arab country.

With two presidents deposed in six years, political turmoil has left the country's economy in deep crisis.

Egypt, its latest President Abdel Fattah al-Sisi has suggested, is facing a moment of truth when tough, long-deferred economic reforms can no longer be avoided.

Sugar is only the latest good to see shortages - before it was rice, cooking oil, baby formula and medicines.

Authorities have accused companies of hoarding and promised to resell seized stocks at lower prices.

But patience is already wearing thin.

Rising prices 

"Before the presidential election we had enough sugar and rice to export, what happened?" a motorised rickshaw driver asked in an online video that went viral among Egyptians, prompting the government to offer to meet with him.

Outside a bakery in Cairo's Maadi suburb on a recent weekday, a small crowd complained about rising prices.

"We're seeing bitter times," said Umm Mahmoud, a cleaner, as she bought bread.

"I voted for Sisi. He is making projects, but they're not for us," she said, referring to schemes like an expansion of the Suez Canal.

And frustration is likely to grow as Sisi, who overthrew his Islamist predecessor Mohammed Morsi in 2013, rolls out an austerity programme including subsidy cuts in return for a $12bn  loan from the International Monetary Fund.

Egypt's international reserves were up to $19.6bn in September, an increase from previous years but less than 50% of the early 2011 level, before an uprising unseated autocrat Hosni Mubarak.

'Worrying to investors'

Much of the money went to propping up the pound against the dollar with incremental devaluations well short of the rates offered by the black market, increasingly the only recourse for importers.

The reforms, such as devaluing the pound and cutting subsidies, have long been demands of investors and international creditors. The pound is expected to undergo a major devaluation by the end of the year.

"What the government is trying to do over the last period is to get the IMF loan and utilise a decent level of financing to resolve the shortages of foreign exchange and mispricing," said Mohamed Abu Basha, an economist with EFG Hermes investment bank.

But the reforms, including cuts to fuel and electricity subsidies to narrow the budget deficit, have been accompanied by haphazard measures with an eye to assuaging public discontent - such as the sugar seizures.

Prime Minister Sharif Ismail told the Bloomberg news agency that the government has so far seized 9 000 tons of sugar which it will be reselling at lower prices.

Menna Shams El Din, investment relations director at Edita, said the seizure of the company's sugar stocks had "raised concerns from the investment community".

"The whole management of the sugar crisis is, I agree, very worrying to investors," said Ziad Bahaa Eldin, a former deputy prime minister and economist.

Tourists and investors 

"It shows a capacity to take measures that sound and look effective when everyone knows that the bottleneck is due to something else," he said, in this case rising global sugar prices and a new tariff.

In a country where 27.8% of the population is considered poor and inflation has reached 14%, the possibility of mass protests is a real concern to the government.

On the other hand, after a crackdown that has killed hundreds of Morsi supporters and jailed thousands of Islamist and secular dissidents, there may not be anyone left to organise sustained protests.

Many Egyptians are also weary of the unrest and jihadist violence that drove away tourists and investors over the past six years.

"Things will continue as they are," said one Cairo man leaving a grocery store with a small packet of cheese and bread. "What else are people going to do?"

Read more on:    egypt  |  north africa

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