The Egyptian Pound has devalued 60% in the last 24 hours, plunging the country into a deep economic crisis. This unprecedented drop in the currency’s value is the result of several factors, including political instability, social unrest, foreign debt, and the global pandemic.
The political situation in Egypt has been volatile since the 2011 revolution that toppled the long-time dictator Hosni Mubarak. Since then, the country has witnessed several changes of government, military coups, and violent clashes between different factions. The current president, Abdel Fattah el-Sisi, has faced criticism for his authoritarian rule, human rights violations, and suppression of dissent.
His legitimacy has been challenged by various opposition groups, some of which have resorted to armed resistance. The lack of political stability and security has deterred foreign investors and tourists, who are vital sources of income for the Egyptian economy.
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The social unrest in Egypt has also contributed to the currency crisis. The population of Egypt is over 100 million, making it the most populous country in the Arab world. However, many Egyptians suffer from poverty, unemployment, inflation, and poor public services.
The pandemic has exacerbated these problems, as the government has struggled to contain the spread of the virus and provide adequate health care and social support. The frustration and anger of the people have erupted in frequent protests and riots, which have disrupted the normal functioning of the economy and damaged public infrastructure.
The foreign debt of Egypt is another factor that has weakened the pound. Egypt owes about $130 billion to various creditors, including the International Monetary Fund (IMF), the World Bank, and several countries. The debt burden has increased over the years due to high interest rates, low growth rates, and currency depreciation.
The government has tried to secure more loans and grants from its allies, such as Saudi Arabia and the United Arab Emirates, but these have come with strings attached, such as implementing unpopular austerity measures and reforms. The debt crisis has reduced the confidence of the international community in the Egyptian economy and its ability to repay its obligations.
The global pandemic has also played a role in the currency collapse. The pandemic has affected the world economy in unprecedented ways, causing a slowdown in trade, tourism, remittances, and oil prices. These are all important sources of revenue for Egypt, which relies heavily on its external sector.
The pandemic has also increased the demand for hard currencies, such as the US dollar and the euro, as people seek to preserve their wealth and savings. The supply of these currencies in Egypt has been limited due to the restrictions on travel and transactions imposed by various countries. This has created a shortage of foreign exchange in the Egyptian market, leading to a sharp rise in the exchange rate of the pound.
The devaluation of the pound has had severe consequences for the Egyptian economy and society. It has increased the cost of living for millions of Egyptians, who have to pay more for imported goods and services, such as food, fuel, medicine, and education. It has also eroded the purchasing power of their incomes and savings, which are mostly denominated in pounds.
It has reduced the competitiveness of Egyptian exports in international markets, as they become more expensive for foreign buyers. It has also increased the risk of inflation and hyperinflation, as prices spiral out of control due to rising demand and shrinking supply.
The currency crisis requires urgent action from both the government and the international community. The government needs to restore political stability and security in the country by engaging in dialogue with its opponents and addressing their legitimate grievances. It also needs to implement economic reforms that can boost growth, diversify revenue sources, reduce debt, and attract foreign investment.
The international community needs to support Egypt with financial assistance that can help it overcome its liquidity problems and stabilize its exchange rate. It also needs to ease its trade barriers and travel restrictions that have hampered Egypt’s external sector.
The Egyptian pound is not only a symbol of national sovereignty and pride, but also a key determinant of economic well-being and social welfare. Its devaluation is a serious challenge that threatens to undermine the progress and development of Egypt. However, it is also an opportunity to rethink and reshape its economic model and policies in a way that can foster more resilience, sustainability, and inclusiveness.