Egyptians struggle as austerity grips

Fruit vendor Abdel-Wareth Hassan trusts the Egyptian government saying "the country has gotten better and cleaner since the 2011 revolution but now the government needs to get the country on track."

Story highlights

  • The Egyptian pound has plummeted on currency markets
  • Cairo residents tell CNN they are struggling to make ends meet
  • The government is advocating austerity measures
  • Egypt has been relying on loans

Cairo, Egypt (CNN)The Tawfiqia fruit market in Cairo is unusually empty on Thursday afternoon. Vendors sit next to stacks of local and imported fruit waiting for the occasional customer. Then they buy half of what they would traditionally purchase ahead of the weekend.

"We have just finished paying school tuition and now we face the increase in prices. Everything has gone up," said Gamal Gharbawy, a messenger and father of two, as he walked out carrying a small bag of dates.
    "I have to deprive myself of many things to save for my family and children."
    Gamal Gharbawy works as a messenger and has two children. "The price of everything we used to buy has doubled. Where can people get this money from?"
    Egypt floated its currency on November 3 and it has plummeted from 8.8 Egyptian pounds (LE) to the dollar to an average of 16-17. For almost a year prior to this, a dollar shortage has affected import-reliant industries and food supplies.
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    Numerous blows for tourism, including the suspected ISIS bombing of a Russian charter plane in Sinai in October 2015, have dried up one of the main sources of foreign currency.
    Foreign reserves were halved after the 2011 uprising, and, like the economy, have since struggled to get back on track.

    Essentials goods made a priority

    Even before the float, the dollar was trading at LE 18 on a black market that persisted despite government crackdowns.
    Industries involving essential goods were put on a priority list to receive the dollar at the official price. But even that didn't prevent recurrent shortages in some food products and drugs.
    A recent sugar shortage prompted supermarkets to ration their supply, only allowing customers two kilograms at a time. Lines extended outside government outlets selling basic food items. The military launched a campaign to sell boxes of basic supplies at half price, LE 25, across the country.
    "The main concern is providing citizens with essential commodities," Prime Minister Sherif Ismail told State-TV on Saturday.
    "We are still committed to this and with the proper prices. With God willing, the exchange rate will stabilize in the coming period, so it will improve and everything will be fine.
    "In coordination with the Central Bank we have allocated $1.8 billion dollars for Egypt's food needs in the next six months," he said.
    Around 27% of Egyptians live under the poverty line, according to the latest government figures released in the summer.
    The poor are hit the most with the devaluation and subsidy cuts. According to the Central Agency for Populations Mobilization and Statistics, 82% of the poor are not included in the government's social protection system.

    Shortage of medicines

    Medicine manufacturers like EIPICO import about 90% of their ingredients. Some production lines stopped over the months as the company, like many others, struggled to get foreign currency to pay foreign suppliers, some of whom now demand 100% payment upfront.
    With fixed government prices, manufacturers say they struggle to survive when costs approach or go over the selling price.
    Osama Rostom of medical firm EIPICO said: "We all have the difficulty to import raw material. The government is taking our concerns seriously and I believe they'll help us."
    "It's the companies that are subsidizing the medicine and this cannot go on for long," said Osama Rostom, vice chairman of EIPICO which employs close to 5,000 people.
    Imported medicine for things like cancer treatments are difficult to find in the market. Many have resorted to social media to find live-saving drugs.
    "The pressure won't come from us, it'll come from the patient who will start to see there is a shortage and this is no good news for any government," Rostom added, explaining that despite the crisis it's not too late for the government to help the market.
    Rawan Abdullah is a 22-year-old graduate who believes her first job will not cover her living expenses. "Costs of transportation, clothes and electronics have all gone up," she said.
    When the Egyptian pound was floated, the Central Bank governor Tarek Amer proclaimed that the worst was over.
    Hours later, fuel prices increased, driving up the costs of transportation and consequently all prices.
    "Transportation from the market used to cost us LE 50-60, now it is LE 100," said Abdel-Rehim Sayed, a fruit vendor.
    "They tell us it's not them that increased fuel prices. And when customers ask us why we increased our prices we tell them it is not us. Look at those high up."
    Ahmed El-Hawary is a street vendor and has four children. "Everyone is suffering," he said. "Anyone who tells you life is rosy is afraid to tell the truth. I have four kids. I can't provide for them. Egyptian money is worthless."
    Other vendors fear the increase in their prices would make their products too expensive for their low-income customers.
    "We went to bed and the dollar was LE 8 and woke up to find it LE 18," said Ahmed El-Hawary, a street vendor in downtown Cairo.
    "We went sleep and the fuel was LE 2.6 a litre and woke up to find it LE 3.5. This happened to everything. Exuberant, unscrupulous price hikes. People are tired."
    He pulled a 200-pound note from his pocket. "It's now worth LE 20," he said in frustration.
    The International Monetary Fund approved on Friday a $12 billion loan to Egypt to be delivered over three years. The floating of the pound and cutting fuel subsidies are part of the plan.
    The government is promoting austerity. "Bold reform shortens the way," read billboards and TV public service adverts, encouraging citizens to be patient.

    Relying on loans

    In a youth conference in October, President Abdel Fattah el-Sisi advised citizens to soldier through the tough times. "For 10 years, I had nothing but water in my fridge. I didn't say anything," he said.
    Confidence in the government and its loan and donations-reliant plans is lacking. Gulf countries have provided Egypt with close to $30 billion since President el-Sisi -- then defense minister -- removed the Islamist president Mohamed Morsy from power in 2013.
    "I'm not optimistic. What has the government done with the billions it got from the Gulf? There's no indication that the [IMF] money will make a difference," said a civil servant who declined to give her name. During the interview her colleagues kept checking she was not criticizing the government or the economic conditions.
    The Arab benefactors have hinted that it won't be an open tap. Saudi Arabia delivered on its promise to deposit $2 billion in the Central Bank of Egypt last October but it suspended monthly shipments of 700,000 metric tons of refined oil following an ongoing row over two Red Sea islands and divergence in the countries' positions on Syria.
    Timothy Kaldas from the Tahrir Institute for Middle East Policy said: "The lack of transparency has damaged Egyptian interest whether it be the economy, security, tourism, or political situation."
    "I think the fundamental problem is that the government has long mistaken transparency for a liberal luxury when it's in fact a necessity," said Timothy Kaldas, a non-resident fellow at the Tahrir Institute for Middle East Policy.
    "The lack of transparency has damaged Egyptian interest whether it be the economy, security situation, political situation.
    "What we need is a sober and realistic understanding of what we are going through and what we should be expecting. The reality is the worst is not over."