The foreign exchange shortage crisis in Egypt led the government to impose many obstacles to restrict imports from abroad, which resulted, over time, in a severe shortage of imported goods, some of which are very basic, and their domestic alternatives are non-existent or limited.
A few days ago, the head of the Internal Trade Committee of the Importer’s Division, Matta Bishai, issued an angry statement, stressing that the import operations of finished goods have almost completely stopped since last March due to the Central Bank’s decisions restricting imports. This resulted in severe shortages of goods such as sanitary ware, electrical appliances, household items, office supplies, wood, furniture, toys, and vehicle spare parts. Bishai talked about receiving many complaints in various commercial sectors about their inability to import and enter new goods from last March until now, which pushed prices to rise from 20 to 45%, according to each sector separately.
In a report published by Bloomberg Agency, shoppers discussed their difficulties in finding many imported consumer goods, such as ethnic cuisine and clothes bearing foreign brands, on the fourth of this August. According to the report, some clothing stores were forced to put winter clothes to fill their stock of summer clothes that had been out of stock, and they could not import others. Two officials in two Egyptian companies told Bloomberg that the import crisis had ravaged the imports of the two companies. The first, who works for a company that sells foreign consumer goods, said that the company’s imports fell from a monthly total of $25 million to $1 million in the past four months, while the second, who works for a company that imports cars, said his company did not get a single approval to bring in vehicles from outside since the end of March. It is expected that significant stagflation will occur in the Egyptian markets if the crisis is not resolved soon, as the scarcity of imported goods leads to a rise in their prices beyond the capacity of many consumers, leading to a recession in the markets.
The bleeding of the country’s foreign exchange reserves has continued since the beginning of this year, as it decreased from 41 billion dollars at the end of December 2021 to 33.4 billion dollars at the end of last June, a decrease of 18.6%. This comes at a time when the external debt is increasing at an unprecedented and escalating pace, as it rose from 145.5 billion dollars at the end of last December to 157.8 billion dollars at the end of last March, an increase of about 12.3 billion dollars in three months. This increase represents a rise of 8.4% in the external debt in just three months, which means an increase of approximately 17% in one year, according to data from the World Bank.
Egypt is classified among the countries with a high risk of defaulting on its foreign debts. Reuters indicates that the risk in the Egyptian case is related to the ratio of external debt to foreign exchange reserves. It is expected that Egypt will need to repay $100 billion by 2027. This negative picture of the Egyptian external debt situation is reinforced by the decline of net foreign assets in the banking system to more than minus 305.1 billion pounds last May, a decrease of 67.7 billion pounds compared to net foreign assets last April, according to data from the Central Bank of Egypt. The net foreign assets represent the total assets of the banking system, including its dues – which includes the Central Bank and banks – from foreign currencies in its dealings with non-residents in Egypt, minus the obligations from those currencies, including, for example, debts on it.
Egypt has no hope of surviving the economic crisis except by obtaining a loan from the International Monetary Fund. Negotiations are currently underway, but they are stalled due to the Fund’s placing of several demands that the Sisi regime considers challenging to implement for fear of public anger. Among these demands are taking decisive steps regarding greater flexibility in the pound exchange rate, enhancing the competitiveness of the private sector while reducing the role of the state and the army in the economy.