The Egyptian pound is at stake.. so what is the reason?

"What is happening to the Egyptian pound? Has it really lost its value?"

Two questions occupy the minds of most Egyptians, coinciding with a wave of price hikes in the markets ahead of the blessed month of Ramadan, and amid analysts' expectations that agree on the existence of tangible effects on the middle and working class, especially since the effects included the prices of various basic products in the Egyptian markets.

There are many important indicators that predicted the devaluation of the Egyptian pound, most notably the expectations of the American bank “JP Morgan” to invest towards Egypt to reduce the value of the Egyptian pound against foreign currencies, stressing in a report issued early this month that the value of the pound is currently higher by 15 % of its actual value, adding that there are 3 scenarios for Egypt, namely: either keeping it unchanged, or reducing it by certain percentages, or moving to the more difficult scenario and reducing it by 15% within the framework of a program with the International Monetary Fund.

hot money

What the Egyptian pound is exposed to comes in conjunction with the exit of huge quantities of foreign bonds known as “hot money” after the outbreak of the Russian war on Ukraine on February 24, and with successive crises on the global banking sector and losses on global stock exchanges estimated at billions of dollars, which Reflected on the situation in Egypt by extension.

In addition to the successive losses of the local stock exchange over consecutive days, which amounted to 13.5 billion pounds on the eighth of this March, in just one day, the total bonds withdrawn by foreign investors during just 3 days amounted to about 1.19 billion dollars, according to Reuters reported in its report that During which the exit exit was monitored by updating stock exchange data for the sixth of March, after foreign investments in debt instruments (bills and bonds) had recorded about $34 billion since September of last year, according to the Fitch credit rating report issued on October 20. October of last year.

It seems that Egypt has ruled out expectations of impacts on liquidity in the banking sector through the Egyptian Finance Minister, Dr. Mohamed Maait, who made official statements during a cabinet press conference last Friday, during which he emphasized the existence of a cash reserve estimated at 170 billion pounds, saying that the state budget is capable of Dealing with the crisis, as Egypt has overcome similar difficult circumstances, he said.

However, financial expert and former head of the Egyptian Investment Association Hani Tawfik believes that the decision to reduce the Egyptian pound is necessary and urgent, considering that the deterioration of the value of all other currencies against the dollar would affect the dollar in the local market and create a parallel market in Egypt, if the dollar price is not gradually moved in the banks And give it the necessary flexibility to respond to the forces of supply and demand under the current negative local and global conditions.

He pointed out, in a post on the social networking site "Facebook", that the withdrawal of a large proportion of foreign investments from Egypt comes in order for these investments to return to their safe havens in light of the global economic conditions, which led to a sharp decrease in the net dollar assets of banks. He added that in these circumstances and with the deterioration of the currency’s position against the dollar, it must be given the necessary flexibility to respond to the forces of supply and demand under the current negative local and global conditions, especially with the deteriorating conditions in global stock exchanges.

Tawfik pointed out that the decrease in the value of the Egyptian Stock Exchange's capital by tens of billions of pounds is understandable due to the currently known investment obstacles, but what cannot be understood is the sales of foreigners that have increased in recent days. A pound in two days, so do they see something that we don't?"

Egyptian street and inflation

The Egyptian street suffers from significant increases in the prices of various products. According to a statement by the Government Mobilization and Statistics Authority last Thursday, there is an increase in the inflation level by 7.3% compared to last January, and the agency described in its statement the increase at the highest since mid-2019, justifying this by increasing prices Food products, considering that calculating this inflation rate comes before calculating the effects of the Russian-Ukrainian war on the Egyptian market.

It is noteworthy that the prices of many basic commodities, most notably bread, flour, oil, meat, and others, have risen, so that Egypt recently announced a decision to ban the export of 6 commodities it had been exporting, namely wheat, flour, lentils, crushed beans, gravel and pasta, for a period of 3 months circulated by the Egyptian media, according to an official statement by the Ministry Trade and Industry last Thursday.

And the Egyptian Prime Minister, Mostafa Madbouly, had said last Wednesday that basic commodities are available and there is no shortage, and there is a surplus of them, indicating that there are exaggerations in some commodities, while there are other commodities whose price is logically high in light of the conditions and the advent of the month of Ramadan, such as poultry, He stressed the existence of a reserve of commodities, such as wheat, from which a reserve is available for a period of 4 full months.

Tangible effects

“It is getting crazier,” says Amira, a housewife to Al Jazeera Net, considering that the pound has significantly decreased in value during the recent period, which came in the form of unjustified price hikes borne by the Egyptian citizen who is already facing economic pressure, as she described.

Amira wondered about the reason for the high prices of all the important basic products that she went to buy a few days ago, just before Ramadan, such as vegetables. 10 pounds ($0.63), and its price was also estimated at 5 pounds, as well as eggplant, which reached 15 pounds ($0.95) after it was recording 7 pounds ($0.44) per kilogram.

She pointed out that the prices of other important products such as pasta, flour, rice and edible oil witnessed a movement in their prices, which she considered incomprehensible, especially in light of the emphasis on the availability of these products through various media, noting the need for market control.

government actions

In a related context, the government, represented by the Ministries of Supply and Agriculture, announced the provision of consumer and basic goods, and Ramadan products at discounted prices to citizens as a way to try to reduce the high prices that appeared in the Egyptian market, stressing the implementation of several control campaigns against traders who raise the prices of goods after noticing repeated complaints. towards raising prices.

While the financial markets expert, Dr. Wael Al-Nahhas, ruled out the depreciation of the Egyptian pound, despite the exaggerations that are being declared about the Russian-Ukrainian war, and its alleged repercussions of the rise in prices in the Egyptian market, considering that the depreciation of the Egyptian pound stems from the rise in prices of various products in light of the weak role of the Egyptian market. The state is supervising the merchants and the markets.

Al-Nahhas indicated, during exclusive statements to Al-Jazeera Net, his words by saying, "Egypt has not yet imported food products from abroad, and all the current prices in the markets are from inside the stores of merchants, such as wheat, for example, which has not been imported since the outbreak of the Russian-Ukrainian war, and despite that, prices in bakeries rose in Officials continued to announce that there was no problem related to the shortage of wheat or the difficulty of providing it, which suffers from most commodities whose prices have risen without justification, except for the presence of speculations carried out by traders either out of fear of the effects of the war or a desire to profit from the crisis at the expense of the citizen who did not increase His income was originally to face those huge price increases.”

With regard to the exit of foreigners from investing in debt securities and withdrawing their investments, Al-Nahhas had a different vision, as he saw that the exit of investors at once is only for a political purpose resulting from the human rights situation in Egypt, which the West constantly criticizes, noting that Egypt offers the highest interest rate. For foreign investors in debt, which is a great incentive for them to enter with their money, as it provided them with great guarantees.

Al-Nahhas stressed the need to activate the role of a group to manage the crisis of the current economic conditions, which was undoubtedly affected by the global markets already affected by the Russian and Ukrainian wars, noting that the Egyptian citizen increases financial burdens in light of the stability of his income, which increases suffering and poverty rates in the absence of Control of prices and speculation in the markets.