CAIRO: Ramadhan is a time for daytime fasting and lavish evening feasts, but Egyptians are scaling back preparations for the holy month this year after austerity measures fuelled decades-high inflation.
At a Cairo supermarket, Rana, a web designer and mother of two, said she was buying less food in the run-up to the start of Ramadhan this weekend, depending on the sighting of the crescent moon, a period that usually sees a surge in demand.
Other shoppers who gathered around fruit and vegetable stalls shared her dismay.
In April, core inflation neared 33 per cent, and rose over 44 per cent for foodstuffs. “We cut down a lot on what we buy because the prices are too high,” said Rana as she sifted through a pile of tomatoes.
The record price increases followed the government’s decision to float the pound in November — seen as a precondition for a $12 billion IMF loan — that sent the currency plummeting.
With the pound trading at around 18 to the dollar, from 8.9 before November, the price of imports and local goods that use imported components has sky rocketed.
The government also adopted a Value Added Tax and slashed fuel subsidies. Those are measures that previous Egyptian governments would not have dared to undertake for fear of sparking unrest.
But President Abdel Fattah al Sisi, a former army chief who ousted his predecessor Mohamed Morsi in 2013, has said he had no choice.
The measures were necessary to get the IMF financing, which provided Egypt a lifeline as foreign reserves dwindled and investors and tourists stayed out of the country that has been rocked by years of unrest.
For now, Egyptians appear to be absorbing the shock, while investors are applauding the reforms.
Protesting can lead to jail by the heavy handed government, and many blame the demonstrations that ousted strongman Hosni Mubarak in 2011 for years of chaos.
“What is coming will not be easy, but at least the shock has been absorbed. Reactions from foreign investors have been positive,” said Ramy Orabi, an economist with Pharos Holding for Financial Investments.
The International Monetary Fund, which views the reforms so far as successful, said this month it would release the second tranche of the loan in a “vote of confidence”.
Ratings agency Standard and Poor’s said it anticipated “ongoing fiscal consolidation in Egypt over 2017-2020, supported by the three-year IMF programme”, affirming Egypt’s B-/B foreign and local currency sovereign credit rating.
But the IMF has also signalled concern over inflation, with one official suggesting an interest rate hike to tamp down inflation. Monthly inflation fell from 4.3 percent in January to 1.8 per cent in April. — AFP