Egyptians, the majority of whom have been crushed by high inflation since 2022, started off the year dreading Ramadan, a time when their food bills typically increase.
However, after widespread media coverage of a new deal with the UAE which officials have promised will ease the continuing economic crisis, there is more hope that the holy month’s daily communal meals will be more affordable this year.
Egypt on Friday announced it had granted a UAE consortium the rights to develop 130 million square metres of its Mediterranean coastline, an area known as Ras El Hekma, in exchange for the North African country’s largest direct foreign investment, totalling $35 billion.
The deal is widely expected to bring down food prices for Egyptians, as it will provide their net-importing country with enough foreign currency to bring parallel markets under control and thereby reduce import costs.
A significant drop in the US dollar’s value against the Egyptian pound on the country’s black market has already been recorded since the announcement of the deal.
It had for weeks been trading for more than double the official exchange rate of 31 pounds per dollar, however, between Friday, when the deal was announced, and Saturday it dropped from 62 to 49 pounds per dollar, a currency trader confirmed to The National.
It has since stabilised at about 50 pounds, he said.
Due to a lack of available foreign currency through official channels, importers have for months been turning to black markets to secure sums of money needed to clear their goods.
Small decreases have already been recorded in the price of a number of goods, including food items, since Friday.
“All anyone on the news is talking about is the sale of Ras El Hekma to the UAE and that food prices would come down,” said Somaya Alaa, 38, an Egyptian mother of three.
"I didn’t believe what the news was saying, they are always promising to bring down prices. But when I went to the supermarket on Monday and found that chicken prices had gone down by a couple of pounds, I thought maybe it is true."
The small drop in chicken prices was attributed by Alaa Ezz, secretary general of Egypt’s Chambers of Commerce, to a decline in the price of corn and soybeans, the two main components of chicken feed whose high monthly import bill ($680 million before excise restrictions) had caused prices for the consumer to triple since 2022.
Additionally, the substantial size of the Emirati investment, the first tranche of which, worth $10 billion, is expected to arrive in Egypt’s coffers within two weeks, will allow the government to clear sizeable food shipments held up at ports awaiting necessary US dollars to release them, Mr Ezz said.
“Thus far, importers have only been able to clear enough goods per month to cover short term needs, which has not only worsened the pile up of goods at ports but has kept prices high as demand was often outpacing supply,” he said.
“But now the pile up will actually work out in the country’s favour because once foreign currency is secured, most of the goods can be cleared and sent to supermarket shelves in very little time”.
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Clearing more goods faster will increase supplies at subsidised government food outlets and at free markets, which will, in turn, result in a drop in overall prices within a few weeks, he added.
Since January, the government has offered various kinds of food items at reduced prices at Ahlan Ramadan (or Welcome Ramadan) outlets set up in 18 of Egypt’s 27 provinces.
State-sponsored coverage of the outlets showed long lines of customers waiting to be allowed in, some arriving hours before opening times. Fights between customers over scarce food items that are prohibitively expensive elsewhere are a common sight.
In a statement on Monday, Egypt’s Supply Ministry said the UAE deal has enabled it to reduce prices of cooking oil, which had tripled since 2022, at Ahlan Ramadan outlets, also enabling the country to bolster its food reserves.
While various government statements have promised price decreases before Ramadan, more modest estimates of economic recovery predict a period of at least two months before most Egyptians feel the effect of the cash deposits, according to Ahmed Ghoneim, an economics professor at Cairo University.
Another benefit of the deal for Egyptians, according to a statement from the country's Cabinet, is the cessation during Ramadan of the daily power cuts which had been in effect since July to reduce natural gas usage.
Ahead of the announcement, the Electricity Ministry had issued a poll asking Egyptians whether they would like power to be cut before or after iftar.
The poll had been met with outrage on Egyptian social media channels especially because Ramadan is a popular season for new TV series that run almost on the hour throughout the day and are watched by millions.
Furthermore, decreasing prices have been recorded in sectors unrelated to the holy month, including steel, the price of which has fallen 14 per cent since Friday.
On Sunday, US investment bank Morgan Stanley predicted Egypt would introduce its fourth devaluation ahead of the holy month and increase its official exchange rate to between 40 and 45 pounds per dollar.
The devaluation, a key condition of a yet-to-be-finalised deal that Egypt is undertaking with the IMF for another round of funding, the country’s fourth since 2016, will be made much easier by the UAE cash deposits as it will ensure the country has enough foreign exchange to keep parallel markets and therefore costs of living under control.
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Global state-owned investor ranking by size
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China
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UAE
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Japan
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Norway
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Canada
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