Egyptian currency change painful for citizens
Egyptian officials are seeing a firestorm of angry responses on social media and in the press, as the country adjusts to a decision to “float” the Egyptian pound, taking out fixed exchange rates and letting the value of the currency conform to what the markets support.
With the Egyptian pound swinging wildly in relation to foreign currencies -- for example, 50 percent up against the dollar -- residents are seeing radically different prices for certain key commodities and products.
A Dec. 6 Reuters report shows the move was intended to combat the emergence of black markets, which sprung up around differentiated exchange rates under the fixed rate system.
There is also Egypt’s responsibility to repay a $12 billion IMF loan to consider, especially with a struggling economy in which key drivers like tourism and oil and gas have slumped.
In some senses, the decision to float the currency was inevitable.
“Things work much more smoothly is currency exchange rates are what the markets call for,” Dmitriy Krichevskiy told Gulf News Journal Tuesday. He is an assistant professor of economics at Elizabethtown College in Pennsylvania.
However, Krichevskiy said, this leaves citizens with some serious and frustrating economic problems.
“If your money bought you a Ford truck yesterday, and now it buys you a golf cart, you’re not a happy camper,” he said.
Krichevskiy stated that Egypt used to use subsidies to cushion some of the blows from market forces, but that is hard now in a cash-strapped national economy.
Then there’s the problem of inflation.
“One way to pay their bills is to print more money,” Krichevskiy said, citing a large government sector where salaries cost the government a bunch of money. However, he said, that fuels inflation, and the average citizen feels the pain.
Krichevskiy also commented on the speculation by political and economic experts that Egypt’s money problems largely stem from the political turmoil that has roiled the nation since the days of Hosni Mubarak.
“Mubarak had complete control,” he said, describing how a strong central government set monetary policy and exchanges and import prices. “It’s much more decentralized now -- they’re much more at the mercy of the markets.”
As Egyptian nationals gaze at the rapidly increasing prices of international products, some are putting the situation in moral terms.
“There is no mercy, how come the prices of drugs go up four times, how would you escape God’s punishment on such thing?” an Egyptian going under the name ROTO tweeted, according to the Reuters report.
Meanwhile, experts are trying to reassure citizens. For example, university administrators are seeking ways to balance tuition costs against the financial turmoil.
Time will tell the long-term implications of a monetary policy change that, right now, feels like a whirlwind to the average Egyptian.