In a speech last Wednesday, Egyptian President Abdel Fattah al-Sisi vowed that the devaluation of the pound wouldn’t translate to higher prices. “I assure you, there won’t be price increases for essential goods. That’s a promise,” he said.
Since then, the dollar’s value has spiked on the black market, crossing LE11 for the first time. As for price rises, some vendors and consumers say it’s already happened.
“Everything has become more expensive. Profits are going down and work is really bad,” says Ragab, a young man in his twenties operating a kiosk outside Attaba station in downtown Cairo.
“All prices increased almost immediately after news spreads about the dollar increasing, even domestically made goods. I used to buy a box of cigarettes for LE92, now it costs me around LE104-107. Soft drinks also witnessed a noticeable increase. A pack of 24 cans increased by around LE5,” says Ragab, who – like most people interviewed for this story – asked to be identified only by his first name. He doesn’t blame his suppliers, saying they too have been hit hard by a dollar crisis that has hit both importers and local producers.
Egypt has faced an imbalance in supply and demand for dollars, as currency inflows from sources like tourism and investment have failed to keep pace with Egypt’s appetite for imported fuel, food, industrial inputs and other goods. While foreign reserves dwindled, Egypt’s Central Bank tried to defend the pound by fixing the exchange rate through dollar auctions, and clamping down on deposits of black market funds. The result was a shortage in currency for imports, combined with a thriving black market for dollars. Last month, the CBE finally allowed the pound’s official rate to devalue from LE7.73 per dollar to its current rate LE8.78, and lifted dollar deposit restrictions for importers of goods deemed essential.
According to vendors, these policy changes only added to a months-long trend of price increases, while failing to ease shortages of imported goods.
“The increase in prices is unprecedented, and it didn’t just start after the last devaluation but for a while before that,” says Hesham, head of the frozen products department at a small supermarket in the upscale Heliopolis neighborhood. “The market has been facing stagnation for over two months now, mainly due to the lack of imported goods.”
While imported frozen foods or cans of soft drinks may not meet the definition of essential goods, Hesham says the price hikes have hit more basic items as well. His suppliers’ April price lists show increases across the board, he says. “Meat suppliers added around LE5 to each kilo, oil increased as well, rice reached LE9, if found to begin with. Two months ago it stood at LE6-6.30,” he adds. While Hesham believes that some suppliers might be exaggerating their increases, he generally believes that their costs have increased and they had to raise prices to adjust.
Maged Nady, spokesperson for the Egyptian Grocers Union, confirms that the price increases reported by Hesham are part of a general trend. “Almost 95 percent of food commodities are imported goods, so they all are witnessing problems,” he says. In addition to the pound’s weakness against the dollar, prices for may imported goods went up in February when the government increased customs duties on a wide range of goods by 5 to 10 percentage points, bringing import taxes as high as 40 percent. Although the increases were said to target luxury goods, they also hit many imported food items and personal care items like soap and shampoo.
“However, some goods like rice should not have been affected, because they are not imported. Still, it witnessed an sharp increase,” Nagy says. “Pasta and margarine also shouldn’t increase. If they do, it will be plain robbery. On the other hand, oil and tuna will definitely go up sharply. Detergents will increase as well, even domestically made ones, since all raw materials are imported,” he adds.
Nady adds that whenever farmers hear about an increase in the dollar’s value they refuse to sell with the same old price. The state should maintain strategic stocks of basic commodities to allow it fight this, Nady says, but he argues the recent increase in rice prices makes it clear that the government hasn’t done so. “When you face trouble with a good you are importing that is understandable, but when you are exporting that good [as is thr case with rice], this is a serious problem,” he adds.
Gamal, a supermarket owner in Nasr City concurrs, noting that prices began to increase long before the pound’s official devaluation. Not all of these increases are justified, he adds, saying that some suppliers are taking advantage of the general trend to raise prices even when they are not really affected by the dollar to begin with.
Vendors, of course, aren’t the only ones to have noticed price hikes.
Mona, a middle-aged woman out shopping with her teenage daughter, agrees that prices have been getting higher, and said she believes some sellers are taking advantage of the situation by increasing prices even on back stock purchased before their prices increased. “Prices also differ from one supermarket to another, and while I haven’t yet felt a sharp increase after the last devaluation, prices of almost everything have generally been increasing rapidly for a while now,” she adds.
Farida Mohamed, another shopper, agrees with Mona, adding that the increase started around two months ago. “Oil and rice in particular became much more expensive. Not that I can find them. There has been a very noticeable shortage,” she says.
A few vendors Mada Masr spoke to disagree, saying they had not faced price increases. “My suppliers don’t usually raise their prices when such things happen, and therefore I never raise mine,” said Mohamed, a young man in charge of a kiosk in downtown Cairo. He does note that he had heard rumors about an expected increase in cigarette prices.
Karim, who works at a kiosk in Heliopolis, says that prices have only gone up for some of the items he stocks. “Some soft drinks, like Fairouz and Birell, did increase. Juice and chocolate as well,” he said. Pepsi and Molto snacks, meanwhile, stayed the same price.
While these few dissenting voices may strike a welcome tone for Sisi, the president will have to overcome a daunting combination of macroecnomic forces and individual opportunism if he truly intends to keep prices from rising.