“If the country’s economic conditions do not improve within three to six months at least, we will end up with a revolution of the hungry,” professor of political science Hassan Nafaa told Daily News Egypt in a phone interview.
Nafaa explained that the implementation of the International Monetary Fund’s (IMF) terms will have a serious impact on the state, especially as not all of these terms were studied or decided on by Egyptian experts who understand the conditions of the state. These were imposed by the IMF, which is an organisation that supports free trade that supports businessmen and threatens low-income citizens, said Nafaa.
The reaction to the Central Bank of Egypt’s (CBE) decision to float the Egyptian pound on 3 November has been negative. The decision came as part of the implementation of certain terms decided upon by the IMF to provide Egypt with $12bn to help the state in the process of economic reform. For a long time, Egypt has sought after an IMF loan, but was unwilling to succumb to certain terms.
This decision will increase prices in the country across the board, amid months of price hikes following the appreciation of the US dollar exchange rate and the activation of the value-added tax (VAT)—another IMF condition for the loan.
Political parties, politicians, and rights groups have condemned the government for floating the Egyptian pound, believing that low-income citizens are the only ones who will suffer the dire consequences of this decision.
Some political parties released statements, including the Bread and Liberty party and the Socialist Poplar Alliance party (SPAP). They said that this decision will impact low-income citizens as prices will rise while the value of the national currency will fall, thus they will be unable to afford the forecasted high cost of living.
Citizens expressed their anger on social media platforms, complaining that their financial conditions could not afford the expected increases in prices as a result of the pound’s flotation.
Among the other conditions the IMF attached to the $12bn loan is reducing subsidies. Late Thursday night, the state decided to increase prices on petroleum products, which will lead to higher transportation costs.
Alaa Essam, the youth general secretary of the Al-Tagamou party, commented to Daily News Egypt that the state could have limited the petroleum price changes to fuel only, which higher-income citizens tend to utilise, and not diesel or octane 80, which is preferred by public transportation.
He said that the government failed to deal with Egypt’s deteriorating economy and missed out on taking alternative measures.
Al-Tagamou party previously rejected the the IMF’s conditions, believing such terms will only cause the current economic situation to grow worse over time. Al-Tagamou party is considered a general supporter of government policy.
Head of the SPAP Medhat Al-Zahad agrees, saying that the state is trying to convince people that these decisions will contribute to economic reform, especially once the IMF loan comes through. He said that the state’s debts will increase, especially as Egypt does not have enough resources to pay these debts back. He noted that his party and others, as well as economic experts, have warned against the consequences of this loan, but the state did not respond.
Al-Zahad believes the high prices will lead people to go out into streets and protest. In this case, he said, no one could blame them. Citizens will develop pessimistic attitudes and grow angry, and will subsequently choose to take to the streets to voice their concerns.
“I cannot consider these decisions as helpful towards reforming the country economically. But I can’t even blame the state, because it was already walking down the wrong road from the very beginning. This ending was expected,” Al-Zahad said.
He concluded by saying that there were several alternatives that could have been taken so as to not reach this point. Egypt could have ceased constructing its national mega projects that are consuming a great deal of money, such as the New Administrative Capital and the 1.5m-acres reclamation Project, said Al-Zahad.
Nafaa, Essam, and Al-Zahad agreed that the only ones who will benefit from the IMF’s terms are businessmen and their projects, as they will not be affected by the price hikes as much as ordinary citizens. The three also believe if the situation is not solved, another revolution will erupt and this time it will be the revolution of the hungry.
Egypt’s economy was severely impacted following the revolution in 2011, as foreign investors either halted their work in Egypt or decreased their investments. This was compounded by a decline in production which impacted imports and decreased exports. Egypt’s dollar resources were also impacted following the Russian aeroplane crash in October 2015, as many countries suspended direct flights to Egypt.