Egypt’s economic troubles worsen amid Israel-Gaza war

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The US dollar is soaring to historic highs against Egypt’s pound, tour guides speak of cancellations of up to 20 per cent and a persistent foreign currency crunch is hurting local industries as inflation remains at record levels.

Egypt’s economic woes have intensified amid the Israel-Gaza war, now in its seventh week, which has given rise to a climate of uncertainty and fear.

The most populous Arab nation, home to 105 million people, borders both Gaza and Israel, and the conflict is raging not far from its popular Red Sea resorts in the southern Sinai Peninsula.

Egypt was struggling with its worst economic crisis in living memory when the war broke out last month. With a staggering $165 billion in foreign debt and an annual import bill of $90 billion, Egypt has recorded a drop of more than 50 per cent in the value of its currency since March 2022 while inflation has climbed close to 40 per cent.

The government has consistently blamed the coronavirus pandemic and the Russia-Ukraine war for its economic troubles.

Critics, however, say excessive borrowing, costly megaprojects they deem unnecessary or premature and heavy reliance on inflows of short-term portfolio investment contributed to the crisis.

The US dollar is trading this week at 51 pounds on the vibrant parallel or black market, an all-time high that is a whooping 20 pounds more than the bank rate, according to foreign currency traders.

Egypt’s foreign currency crunch is of serious concern given that the country needs more than $28 billion to meet debt repayments in 2024.

The shortage has led to a $5 billion backlog of imports stuck at ports and problems for foreign companies repatriating dividends.

“I am buying dollars on the black market to give to the bank to get the ball rolling on clearing my imported materials stuck at the port in Alexandria. But the bank applies the official rate and I lose a great deal of money,” a Cairo-based industrialist old The National.

“Everything now is costing so much and becoming less and less profitable. I feel that I am still in business so as not to deprive my employees a livelihood at a time like this.”